Gas is about to drop below $4 for the first time since July

WASHINGTON — Here's a sight for voters' sore eyes: nearly $4 gas.

The average price of gas is poised to fall below that threshold for the first time since July, driven lower by seasonal factors that are reducing demand.

The national average price for a gallon of gasoline early Monday was about $4.01, according to data from AAA. That's down roughly 14 cents since Election Day, when it stood at $4.15 a gallon, and down 36 cents, or a little more than 8%, from a month ago when the price stood around $4.37.

There are 26 states with an average price already below $4, with North Carolina having the lowest average at $3.26.

Few issues were more important to voters this year than the cost of living, and high gas prices were a critical and visible component of those concerns. CNN polling conducted from October through Election Day showed 87% of voters were at least somewhat concerned with high gas prices, with six in 10 saying they were "very concerned."

But experts warn that Americans should not expect gasoline to approach the pre-Iran war level of $2.98 a gallon anytime soon, let alone the sub $2-a-gallon gas that President Donald Trump promised on the 2024 campaign trail.

Why prices are falling

Two seasonal factors have helped drive down demand for gasoline: the end of both the summer driving season and Daylight Saving Time. Americans drive less when it's dark, so earlier darkness means fewer miles on the road. And with increasingly earlier sunsets through December 21, demand will continue to cool.

Yet those factors don't have as much impact on diesel fuel and jet fuel, which typically remain in higher demand during the colder seasons. Diesel is used for trucking and farming equipment and is also the same basic product as home heating oil. Meanwhile, U.S.-based airlines are reporting strong appetite for travel through the end of the year.

Diesel and jet fuel prices have stayed much closer to their peaks. Diesel prices hit a record of $6.52 on September 22 and are down only about 5% since then. Spot jet fuel prices are down about 2% in the same period.

The average price of gasoline, meanwhile, is down about 10% in the same seven-week period.

That higher demand for diesel and jet fuel has kept oil refineries running at maximum speed, which, in turn, has benefitted gasoline. A single barrel of crude oil is turned into myriad products—including diesel, jet fuel and gas—meaning the ramp up in production has also boosted gasoline supplies.

"(Refineries are) operating at higher utilization than this time last year to make all the jet fuel and diesel fuel they can, and that makes gasoline really a byproduct, contributing to higher inventories," said Andy Lipow, president of Lipow Oil Associates.

Trouble ahead in 2027?

Gas may stay below $4 a gallon throughout the next few months—even without a lasting truce in the war in Iran, Lipow said.

But even if a truce materializes, gas prices could stay well above $3 a gallon for the foreseeable future. That's due to the more lasting damage done to the world's refinery capacity from fighting in Russia and the Middle East.

"There's 7 million barrels a day of refined products capacity that's been knocked out by drones or missiles, and that's not likely to return soon," said Tom Kloza, an independent oil analyst and an advisor to Gulf Oil.

As a result, gas prices could rise above $4 a gallon next spring—a move that is likely to agitate Americans again. A survey published by AAA in 2022 found that $4 gas is considered a tipping point for drivers, with 59% of respondents saying they would make changes to their lifestyle or driving habits if prices rose to that level.

"People might be talking at cocktail parties at Christmas about, 'Oh, I only paid $3.50 a gallon today,'" Kloza said. "But watch out next spring — we're going to go sharply higher."

Looking further down the line, prices could face more upward pressure as oil companies catch up on deferred maintenance of their refineries. ExxonMobil CEO Darren Woods told investors earlier this year that the company had deferred maintenance, which helped maintain output and profitability. But those deferrals can't last forever—meaning that prices could rise as refineries go offline.

Kloza says that major oil companies privately talk of how 2027 will be "the mother of all refinery maintenance years."

Another factor that could keep gas prices high, Kloza added: Gas station owners recalibrating their prices.

The final price that Americans pay at the pump is set by thousands of gas station owners, who base their pricing on the wholesale prices they pay, while factoring in the prices of nearby competitors.

During a spike in wholesale gasoline prices, some station owners will actually absorb a temporary loss of profits, even if their customers see a rapid increase in prices, so they don't lose business to rival stations that might have bought gas before the latest rise in wholesale prices.

But when wholesale prices fall, as they have recently, station owners are often slow to lower prices as they try to recoup losses from periods when prices were climbing. It reinforces the industry maxim that "prices go up like a rocket but come down like a feather."

Kloza said the recent drop in prices has been fairly rapid by historical standards.

"It's still a feather, but it's more of a wet feather," he said.

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