Gas prices could drop to the $3 mark for the first time in four years as a swelling oil supply drives crude prices sharply lower, according to a recent analysis by AAA.
The national average price for a gallon of gasoline dropped to $3.05 last week due to falling crude oil prices, lower gasoline demand and cheaper winter-blend gasoline at the pump, according to AAA.
The last time the national average reached $3 per gallon was May 2021.
As of Tuesday, West Texas Intermediate (WTI) futures are trading around $57 per barrel.
Cheaper oil prices benefit consumers as crude makes up the largest portion of the cost of a gallon of gasoline.
It currently accounts for 51% of the price of gas, according to the Energy Information Administration (EIA).
AAA’s report aligns with projections issued by the EIA in September, which anticipate the U.S. average retail price for regular-grade gasoline to be about $3.10 per gallon for the remainder of this year and $2.90 per gallon in 2026.
Andy Lipow, president of Lipow Oil Associates, pointed to market fundamentals as the main driver, telling FOX Business that gasoline prices are tracking crude oil prices lower.
Lipow said that over the last two years, OPEC+ has been restoring its voluntary production cuts, adding supply to the market.
At the same time, Lipow said domestic production has hit record levels of more than 13.6 million barrels per day with additional supplies coming out of Brazil, Guyana and Argentina.
“The result is a glut,” Lipow said.
He cited the EIA’s global oil supply estimates showing that supplies in 2025 are expected to grow by 3 million barrels per day while demand grows by only 700,000 barrels per day.
“Oil prices have fallen dramatically over the last few weeks as the market sees a growing surplus accumulating on floating storage – that is tankers loaded with oil with nowhere to go,” Lipow said, adding that China has been soaking up a lot of the surplus by filling its strategic storage at these low prices.
Lipow expects the national average price of gasoline to hit $3 per gallon in the next week.
Phil Flynn, Price Futures Group senior analyst and FOX Business contributor, credited President Donald Trump’s political relationship with OPEC for the member countries increasing oil production faster than originally planned.
He also noted that reduced global tensions, specifically in the Middle East, are helping to reduce the price of oil. Instability in the region can influence oil markets, because traders often react to regional risk.
