Gas Prices Are About to Hit New Lows

By Halloween — and perhaps much sooner, if the federal shutdown dampens demand significantly — consumers are likely to see the cheapest gas prices so far this year

  • Share
  • Read Later
Getty Images

A year ago, the post–Labor Day period was marked with rising prices at the pump thanks to a brutal hurricane season, among other factors. This year things are different, with prices remaining subdued even when concerns about strife in the Middle East dominate the news. According to this week’s Energy Information Administration report, the national average for a gallon of regular at the end of September was measured at $3.42, which is around 40¢ less than a year ago. The AAA Fuel Gauge Report indicates that gas prices dropped about 20¢ per gallon nationally in the past month. The gas experts at AAA indicate that the September dip was the largest seen since last October, and expect prices to keep inching lower in the weeks and months ahead.

(MORE: The Government Is Down, so Why Aren’t Stocks?)

“Gas prices could drop another 25¢ to 30¢ per gallon to the cheapest averages of the year barring significant refinery problems or higher oil costs,” AAA spokesman Avery Ash said via press release. “Averages in as many as five to 10 states could drop below $3 per gallon, but there is a floor to how low the national average can go given the very high cost of crude oil.”

The analysts at GasBuddy are basically on the same page, issuing a forecast in mid-September for prices to drop 20¢ to 25¢ by Halloween.

As of Tuesday, the national average stood at $3.39, just 10¢ higher than the lowest price seen thus far in 2013: $3.29 per gallon, the average at the beginning of January. Last year, which was an anomaly because September prices were so high, October saw a 26¢-per-gallon dip in the national average; the decrease in October 2011 wasn’t quite as dramatic, with a 13¢ drop in the national average for gas prices. But a gas-price drop in October is fairly standard, and so long as nothing unusual causes current trends to change abruptly, drivers should be seeing new 2013 lows at the pump by the end of the month.

In fact, something unusual is happening that could cause gas prices to drop at a faster pace than normal for October and beyond. Among the many expected effects of the federal-government shutdown that began on Tuesday are a general slowdown in the economy and diminished demand for oil and gas. The price of oil futures sank to the lowest level in three months on the eve of the shutdown, and the longer the shutdown, the longer it is likely that oil futures — and subsequently, prices posted at gas stations — will keep heading south.

(MORE: Drinkers, Stoners, Insomniacs Wanted: Fast Food Expands Late-Night Menus)

“The economy will slow down, confidence will slide, and demand for crude will be hurt,” Evan Lucas, an analyst with IG, told the Associated Press on Monday. “There will be a real snowball effect if the partial shutdown goes ahead.” As we now know, the shutdown is proceeding ahead. Lower gas demand and lower gas prices are likely to come as a result, but the shutdown is also expected to hammer the economy in general, to the tune of $1 billion per week, by some estimates.