Prices at the gas pump are expected to reach an 11-year low on the Fourth of July, just as a record number of Americans prepare to hit the road during the holiday weekend.
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Analysts at GasBuddy.com believe the national average will fall 50 cents from last year’s Independence Day mark to $2.27 a gallon, the cheapest gas prices since 2005. Just two years ago, the average price of regular gasoline was much higher at $3.66 a gallon.
“The U.S. average price of gas was lower on July 5th than it was the previous week seven out of 10 occasions dating back to 2006,” said Gregg Laskoski, senior petroleum analyst at GasBuddy. “This defies the general consensus on Main Street that prices rise ahead of a major travel holiday.”
However, there is one wrinkle to price forecasts this weekend: gas taxes. Coinciding with the start of a new fiscal year, several states are hiking or cutting their excise taxes on gasoline starting Friday. As a result, regional gas prices could fluctuate to kick off Independence Day weekend.
Tax increases are in the pipeline for Maryland and Washington. Maryland will add 0.9 cents to its rate, increasing gas taxes in the state to 33.5 cents a gallon. Washington State’s gas tax will climb to 49.4 cents a gallon, up 4.9 cents. New Jersey could become the third state to raise gas taxes this year. A bill making its way through the state’s legislature includes a 23-cent hike that would take the gas tax from 14.5 cents to 37.5 cents a gallon.
States currently average 29.64 cents a gallon in gas taxes and fees, according to the American Petroleum Institute. The potential tax increase in New Jersey would challenge the state’s standing among the cheapest states for drivers. New Jersey gasoline costs an average of $2.09 a gallon, ninth-lowest in the U.S.
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Meanwhile, tax cuts are coming for Nebraska, North Carolina and California drivers. Nebraska and North Carolina will reduce tax rates by a penny, while California’s gas tax will fall 2.2 cents a gallon.
Drivers Capitalize on Cheap Gas
Gas prices are dropping in time for one of the year’s busiest weekends for travel. AAA said nearly 43 million Americans will take a trip by car, plane or another form of transportation, setting a new all-time high. The decline in gas prices has encouraged consumers to drive more. An estimated 84% of those travelers will drive, an increase of 1.2% compared to last year.
The national average on Thursday was $2.29 a gallon, 3 cents below last week’s average. According to AAA, U.S. drivers have already saved $20 billion on gasoline so far this year.
More Savings on the Way
GasBuddy sees the downward trend continuing through the rest of 2016. The website anticipates a return of a sub-$2 national average by Thanksgiving, thanks to the arrival of cheaper winter-blend gasoline and a slowdown in demand following the busy summer driving season.
Drivers in the South will likely benefit the most, while West Coast gas prices are expected to remain above $2 a gallon.