Cheaper Gas: Prices at the Pump May Be Headed Lower

Pumped Down

Gas is getting cheaper. The average price for a gallon of gas was roughly $3.37 at the end of last week, down from $3.85 a year earlier, per AAA data.

But that’s not all of it: The trend may just continue.

Tailwinds and Tail Risks

Gas prices are highly correlated to the price of oil, but demand plays a key role too.

The rise of remote work and growing use of electric vehicles (EVs) are reshaping gasoline demand. More than a quarter (27%) of U.S. employees work exclusively from home, according to a Gallup poll, which puts a dent in the number of people commuting to work each day. There are also more than 3 million EVs on the road, according to an Edmunds analysis cited in an NPR report, which further reduces demand for gas.

At the same time, the U.S. has ramped up its oil production. In March 2024, it was producing more crude oil than any country, per the U.S. Energy Information Administration.

None of these three factors are expected to change materially any time soon, and gas prices could continue to decline over the coming months. That said, extreme weather has previously disrupted oil production in refinery hot spots like Texas, and geopolitics can impact oil prices too.

Ripple Effects

The cost of gas has a direct impact on most Americans’ budgets, especially those who commute by car. At a time costs remain high across the board, cheaper prices at the pump could provide much needed relief.

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