Gas Prices Are Dropping: Here’s How Much Lower They Might Go

Fuel prices have fallen because global economic jitters have dampened demand for oil, analysts said. U.S. oil refineries have also increased their output after many were shut down for maintenance, which has also helped keep gas prices low, they said.

Tom Kloza,

global head of energy analysis for OPIS, said he expects gas prices to continue falling through the holiday season. 

“The next 60 days look really, really hospitable for consumers,” Mr. Kloza said. 

There continue to be regional differences in gas prices even as the cost of fuel continues to drop. The average price of a gallon of gasoline has fallen below $3 in Texas, Arkansas, Mississippi and Oklahoma, according to OPIS, which is part of Dow Jones & Co., publisher of The Wall Street Journal. It is above $4 in California, Washington, Oregon, Idaho and Nevada, according to OPIS. While gas prices remain higher than the national average on the West Coast, the region has seen some of the biggest declines in prices in recent weeks. 

Fuel prices spiked earlier this year across the globe after Russia’s invasion of Ukraine sparked fears that the global oil market would see major disruptions. The average price of gas was $3.54 a gallon at the time of the invasion. It rose more than 40% by June. 

But as the U.S. and Europe pulled back on purchases of Russian oil, Russia was able to sell more oil to Asia and Africa, said

James Hamilton,

an economics professor at the University of California in San Diego. 

“So far those sanctions have had less bite than people thought in the first few weeks of the conflict,” Mr. Hamilton said. 

China’s scaled-back consumption of oil has been a major contributor to declining global oil prices, analysts said. The Asian nation accounted for 16% of global oil consumption in 2021, according to research firm Capital Economics.

Capital Economics estimates that the recent surge in Covid-19 cases in China will cause oil consumption to fall farther, by one million barrels a day in December. 

“With China now battling its most widespread Covid-19 outbreak since the start of the pandemic, the country and its economy face a dire few weeks,”

Edward Gardner,

an economist at Capital Economics, said in a research note. “As a result, China’s demand for oil will come under pressure.”

Demand for fuel has also fallen in the U.S.

Mr. Kloza of OPIS said commuting to work still hasn’t fully rebounded to prepandemic levels, one of the reasons why gas prices are lower. In the U.S., demand for fuel in the fourth week of November was 10% lower than the same week in 2019, according to the U.S. Energy Information Administration.

The drop in gasoline prices is a welcome development for American consumers who have been squeezed by the high cost of goods, said

Zach Miller,

an economics professor at the University of Missouri. 

“Having fuel prices back off a little bit—that’s good news,” Mr. Miller said. “That’s more money in my pocket that I can spend on other things.”

Household spending in the U.S. ticked up in October headed into the holiday season as shoppers took advantage of an increase in income and a slight tapering off of still-high inflation.

Patrick De Haan,

head of petroleum analysis at GasBuddy, said he expects U.S. fuel prices to approach $3 a gallon by the end of the year, while acknowledging there are a few factors that could cause prices to rise again. 

The proposed price cap on Russian oil from Europe and the U.S. could lead to higher oil prices, Mr. De Haan said. The 13-member Organization of the Petroleum Exporting Countries and a separate group of producers led by Russia—collectively known as OPEC+—could cut oil production, which could mean higher prices at the pump, he said. 

Mr. De Haan said falling gas prices could be short-lived. Fuel prices tend to rise on a seasonal basis starting in mid-February, he said. But an increase in costs could come sooner if there is unforeseen geopolitical tension or if China relaxes its zero-Covid policies, he said.  

“The high didn’t last very long. Prices started to come back down,” Mr. De Haan said. “And I don’t think the low this winter will last a sizable amount of time.”

Write to Joseph De Avila at joseph.deavila@wsj.com