National Average Gas Price Continues to Fall – Now at $2.40 per Gallon

The national average price for a gallon of regular unleaded gasoline now stands at $2.40 per gallon – a price not seen since early March 2007.

Gasoline prices are now down nearly 42% from the record highs set back in mid-July of this year.  Over the past month, the price of gas has fallen by nearly 33%; even over the past week, it’s fallen over nine percent.

In fact, prices have fallen so far, that today’s average price is 13% below what it was exactly one year ago.

There are only two states reporting an average gas price above $3 per gallon: Hawaii at $3.61 and Alaska at $3.32.  Currently, 34 states plus Washington, D.C. are reporting an average price below $2.50 per gallon, with Oklahoma reporting the lowest average price at $2.01 per gallon.

The main factor behind the recent record drop in gasoline prices is the corresponding drop oil prices.  In fact, the decline in prices has actually been much more drastic for oil – down nearly 54% from this summer’s record high – than it has been for gasoline.

(Now, before you get bent out of shape, remember that gas prices tend to not climb as fast as oil prices.  Conversely, gas prices also tend to not fall as fast as oil prices, either.)

However, this decline in oil prices may be coming to an end relatively soon for two reasons:

  1. After OPEC’s recently announced 1.5M barrel per day production cut failed to rally oil prices, there has been talks that the cartel will meet before their next scheduled meeting to announce another substantial production cut in order to get oil prices back into OPEC’s “fair value range” of $80 to $100 per barrel.
  2. If it turns our this current economic disruption really isn’t the end of the world and demand for oil isn’t as eroded as anticipated, we could see a lot of investment money jump back into commodities.  Invariably, this would likely cause a dramatic spike in prices, not unlike what we saw in the first six months of the year.

Obviously, I don’t know with 100% certainty where gasoline and oil prices are headed.  However, I do believe that there really isn’t much more room to the downside from current prices, but, because of the current economic unrest, I don’t think that in the short-term, there’s much room to the upside either.

While I don’t think sub-$2 gas is in our future, I also don’t think $3 gas is right around the corner either.

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