Holiday travelers are getting a nice gift this year with gasoline prices well below $3 a gallon in most states. Some drivers could pay even less than $2 this week after OPEC’s decision to stand still ignited a big selloff in oil.
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GasBuddy.com is projecting that by the end of the week a gas station in Texas or South Carolina will be the first in the U.S. to drop its price for regular gas to $1.99 a gallon.
“Even a week ago, I would have said no way,” Patrick DeHaan, a senior petroleum analyst at GasBuddy, said when asked whether $2 gas comes as a surprise. “What a gift from OPEC. It’s the perfect time of year for this to happen.”
Last week, the Organization of the Petroleum Exporting Countries said its members will keep oil production at current levels. Many industry experts expected the cartel to slash production amid a deep slide in oil prices, which hit five-year lows following the announcement.
Oil has rapidly retreated over the last five months, as traders have grown increasingly worried that global supplies are exceeding demand. All eyes are on surging production in the U.S., where drillers are capitalizing on hard-to-reach shale oil.
West Texas Intermediate crude oil rebounded $2.39, or 3.6%, to $68.54 a barrel in recent trading Monday. WTI for January delivery tumbled as low as $63.72 a barrel.
Slumping oil prices have provided relief at gas pumps across the country. According to GasBuddy, the national average was approximately $2.76 a gallon Monday morning, down 24 cents versus last month and 52 cents year-over-year.
That means big savings for motorists, just in time for the holiday shopping season. Americans are spending $200 million less on gas every day compared to last year.
DeHaan initially believed gas prices would fall to an average of $2.85 a gallon by Christmas, but the market’s volatile response to the OPEC news was a game-changer. Now he’s forecasting gas in the $2.50s.
About 12% of U.S. gas stations already charge less than $2.50 a gallon. More than a third of stations will be under $2.50 by Christmas, DeHaan said, and he characterized his estimate as conservative.
Drivers who live near the Gulf of Mexico, or in states with lower gas taxes, are more likely to see prices of $2.50 or less by the end of the year. But the chances of a nationwide drop to $2 a gallon remain slim. DeHaan noted that $2 gas will be available at isolated stations, while the national average won’t drop below $2 unless oil prices breach $60 a gallon.
“These sudden plunges in oil are very worrisome because it suggests the market is in a panic mode. A gradual decline is much more likely to last than a brief plunge,” he explained.