US Gasoline Prices Expected to Drop Below $3 a Gallon as Election Approaches

Gas Prices Expected to Drop Below $3 a Gallon Ahead of Election

By Shariq Khan

NEW YORK (Reuters) – Analysts predict that U.S. gasoline prices may dip below $3 a gallon for the first time in over three years as early as next month, just before voters head to the polls for the presidential election in November.

The anticipated decline in gasoline prices—as a result of decreased fuel demand and lowering oil prices—comes as a welcome relief for consumers who have faced historically high fuel costs that have contributed to inflation. This drop in prices could also serve as a political advantage for Vice President Kamala Harris and other Democrats, who have faced criticism from Republicans regarding high fuel costs.

Currently, the national average price for regular gasoline is $3.25 per gallon, reflecting a decrease of 19 cents from a month ago and a 58-cent drop from the same time last year, according to data from a motorist association. Analysts suggest that the average could fall below $3 by late October, aided by the conclusion of the summer driving season and the transition to cheaper winter-grade fuel.

In North Carolina, a key battleground state for the upcoming election, fuel prices have already dipped below $3.

"Voters will likely remember the prices they encounter while heading to polling stations, which could bode well for Harris in her electoral campaign against Republican Donald Trump," said Patrick De Haan, an analyst at GasBuddy.com.

Research from the Wells Fargo Investment Institute indicates that U.S. presidential approval ratings tend to rise and fall in relation to gasoline prices. Thus, decreasing prices could potentially benefit Democrats in the upcoming election cycle, according to John LaForge, head of real asset strategy at an investment advisory firm.

While presidents have minimal direct influence over gasoline prices, which are primarily dictated by global supply and demand dynamics, prices have seen significant reductions this year due to weaker-than-expected demand, particularly in the U.S. and China. The global benchmark for oil has dropped from over $90 a barrel in April to below $70 recently.

One uncertainty affecting prices is Hurricane Francine, which is impacting oil production in the U.S. and has led to an increase in oil prices by more than $2 a barrel due to concerns about extended production shutdowns.

In 2022, gasoline prices soared to record highs over $5 a gallon due to supply shocks following Russia’s invasion of Ukraine, occurring at a time when global fuel demand was rising as COVID-related restrictions eased.

This year, supply chains have remained robust, contributing to lower fuel prices as refiners operate at increased rates. The U.S. Energy Information Administration reports that U.S. gasoline demand is projected to average 8.92 million barrels per day in 2023, slightly less than last year.

Despite this decrease, the U.S. remains the largest fuel consumer globally, comprising 9% of total oil demand, which makes gasoline prices a significant factor in economic assessments by any government.

On the political front, Republicans have often criticized President Joe Biden’s policies for the rise in gasoline prices and inflation. However, with prices declining, experts believe these criticisms are losing their impact.

Data from the Labor Department indicates that consumer prices rose by only 2.5% in the year ending in August, marking the slowest annual increase since February 2021, while gasoline prices declined by 10% compared to the previous year.

The impact of falling gasoline prices is expected to be particularly noticeable in swing states that could determine the election outcome. For instance, North Carolina’s average price fell to $2.983 per gallon, while Wisconsin’s price stood at $3.043.

Diesel prices, a key indicator of economic health, are also on a similar downward trend due to weak demand and increased supply. Rising diesel costs can influence consumer prices on various goods, from groceries to electronics.

Recent projections from the Energy Information Administration suggest a decrease in U.S. distillate fuel demand, which includes diesel, forecasting it to be 3.83 million barrels a day—about 1% below earlier estimates.

National average diesel prices have fallen to $3.56 a gallon, which is 32 cents lower than at the start of the year and represents the lowest level since October 2021.

"Whoever the next President is will certainly benefit from lower fuel prices and the resulting economic deflation," noted Tom Kloza, head of energy analysis at an industry service.