Steady gas price decline threatened by rising oil prices: AAA
Gas prices still expected to fall under $3 per gallon by Christmas
After weeks of falling gas prices, the pace may start to slow as global oil prices rise, AAA warned this week. (iStock)
A move designed to boost global oil prices could impact the pace of dropping gas costs, according to AAA.
The national average cost for a gallon of gas fell to $3.40 last week, 14 cents less than the week before, according to AAA. In the past two weeks, gas prices have tumbled 26 cents.
However, the Organization of the Petroleum Exporting Countries and allies' (OPEC+) decision to keep oil production output down by 2 million barrels per day – about 2% of the world's demand – could curb the decline in prices that consumers have been seeing at the pump.
"Gas prices are dropping sharply and are only a nickel more per gallon than a year ago," Andrew Gross, AAA spokesperson, said. "But with oil being the main ingredient in gasoline, OPEC+'s move could slow this decline."
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Russian oil price cap could also cause gas costs to rise
OPEC+'s decision to keep its production reduction agreement unchanged through 2023 comes as the European Union, Australia, Japan, the United States, Canada and the U.K. agreed to launch a $60 per barrel price cap on Russian crude oil.
The move was designed to limit Russia's profits in response to the invasion of Ukraine, but it could also impact the price of U.S. gas if the country retaliates, according to GasBuddy's head of petroleum analysis, Patrick De Haan.
Additionally, OPEC+ could decide to cut more oil production, De Haan said.
"For now, however, we’ll likely see another week of declines at the pump in nearly all areas," De Haan said.
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Gas prices likely to keep falling through holidays
Despite the threat of higher oil prices, U.S. gas prices are still expected to keep dropping and "will likely soon be lower" than a year ago, Gross said.
Lower gas prices through Christmas should come as a welcome relief to consumers who are dealing with inflation and rising costs. Inflation remains persistently high, with October's Consumer Price Index (CPI), a measure of inflation, rising to 7.7% year-over-year. That means consumers are spending more across the board this holiday.
"It remains very possible the national average could fall under $3 per gallon by Christmas," De Haan said of gas prices. "There has also been a drop in diesel prices, which this week will fall back under $5 per gallon, and could soon thereafter fall to their lowest level since March."
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