Why gas prices are dropping ahead of the holidays
Gas prices dipped significantly over the weekend, bringing relief for drivers ahead of the holiday.
Decrease in gas prices
Gas prices dipped significantly over the weekend, bringing relief for drivers ahead of the holiday.
As of Monday, the national average stands at $3.15 per gallon, according to AAA. That’s 5 cents less than last week, which was itself 20 cents down from a month ago.
One of the driving forces in the decline is the aftermath of the Nov. 30 meeting of the OPEC+ oil cartel, said Andy Lipow, president of consulting firm Lipow Oil Associates.
Factors contributing to the decline
A subsequent decline in crude oil prices “showed that OPEC+ is struggling to balance oil supply and demand in light of the surprising increase in supply from the U.S., Brazil, and Guyana, as well as disappointing demand from China,” Lipow said.
China, meanwhile, was expected to see a surge in demand that accompanied the lifting of COVID-related restrictions, but despite an early spike, Chinese refiners have recently cut back on their processing rates, Lipow said. A Bloomberg survey of industry analysts and consultants projects Chinese oil demand will decline to about 500,000 barrels per day next year, about a third of the demand recorded over the past year.
After years of growth, the Chinese economy has seen a recent cooling, said Samantha Gross, director of the Brookings Institution’s Energy Security and Climate Initiative, particularly amid concerns of instability and possible outright collapse in the country’s real estate market.
Cycle of gas prices
Domestically, the gas price decline is part of a cycle that has been typical in past years but recently had been absent in the winter months, said Devin Gladden, an AAA spokesperson.
“During the fall and winter, we see days become a lot shorter, inclement weather increasing, drivers spending less time on the road,” a trend that typically drives oil demand down through the end of the year, he said. “Over the past few years, we’ve seen some anti-cyclical events happen during the winter, such as a spike in oil prices, [but] this year prices are following some of the typical trends.”
According to the typical cycle, he added, the prices at the pump will likely stay low until the weather begins to warm and outdoor activity picks back up.
