The Reason U.S. Gas Prices Are Plummeting

By: Lauren | Published: Dec 20, 2023

Gasoline prices in America vary drastically not only from year to year, but sometimes even every month.

And as of December 12, 2023, the average price for a gallon of gas in the US is wildly low at $3.137. Although many people will surely smile when they see that low price tag, many are wondering why this is happening now.

The Current Numbers

AAA recently reported that at $3.137, gas by the gallon is 9 cents lower than it was November, 2023, and the lowest it’s been all year.

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Shell gas station in Washington DC, regular gas at $3.99 and plus at $4.49

Source: Chip Somodevilla/Getty Images

They also noted that the gas supply companies are struggling to to sell barrels for any more than $70 a barrel.

AAA Explains Why Gas Prices Are so Low

According to AAA, there are essentially three reasons why gas prices are plummeting and why gas companies can’t get enough for their product: The weather, the time of year, and an increase in gas production.

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AAA red and blue logo

Source: Wikipedia

First, because the El Niño weather pattern brought a warm winter to the globe this year, gas consumption is expected to drop by 7% since last winter. That means there is less demand and ample supply.

Gas Always Gets a Little Cheaper in the Fall

AAA also noted that “Historically, crude oil tends to drop nearly 30% from late September into early winter with gasoline prices trailing the play.”

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Empty road during autumn with colorful trees

Source: Freepik

So while it’s certainly exciting that gas prices are dropping quickly, it’s actually quite common for this occurrence in the late fall.

Most Importantly, Gas Production Is Up

Weather and time of year are playing their part in low gas prices, but the absolute most important reason why costs are so low is simply that there has been a significant increase in gas production, alongside a lowering demand.

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The Tamar drilling natural gas production platform

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It’s a simple case of economics: If there is too much of something, the value goes down.

OPEC Attempting to Raise Oil Prices Again Soon

OPEC, or The Organization of the Petroleum Exporting, works to ensure the co-operation of oil-producing countries around the world to maximize crude oil profits.

Barrel of gas with OPEC logo

Source: @LeadershipNGA/X

So for OPEC, the quickly falling gas prices are not a good thing, in fact, it means they need to get to work to stabilize the price of gas as soon as possible.

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OPEC Plans to Cut Back on Supply

One of the major reasons why gas is so affordable right now is because supply is higher than demand, and OPEC plans to rectify that issue immediately.

Haradh Natural Gas And Oil Development Project

Source: Reza/Getty Images

They announced in early December 2023 that they plan to cut down gas production by 2 million barrels a day this month, as well as during the first quarter of 2024.

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Why Do Gas Prices Vary by State?

Now, even though the national average is the lowest it’s been all year, the price of a gallon of gas still varies significantly by state.

A gas pump pumps fuel into a car at a Shell service station

Source: Justin Sullivan/Getty Images

And while that’s partially due to supply distances, operating costs, and retail competition, the main difference from state to state are the implemented gas taxes.

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States With the Lowest Gas Prices

The states with the lowest gas taxes are typically the states with the most affordable gas. And as usual, Texas is leading the pack with the average gas price of only $2.60 per gallon.

Texas state flag waving against a cloudy sky

Source: Freepik

Also in the list of top five states with the cheapest gas are Oklahoma ($2.68), Mississippi ($2.70), Missouri ($2.70), and Louisiana ($2.70).

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States With the Highest Gas Prices

And it should come as no surprise that the most expensive gas in the country is being sold in California at $4.70 a gallon, nearly double what Texans pay for the same product.

Aerial photo of the Golden Gate Bridge in San Francisco, California

Source: Freepik

Next is Hawaii at $4.70, then Washington with an average of $4.26, and Nevada at $4.02.

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States With the Most Significant Change

While some states consistently sit in the list of either the most expensive or the most affordable gas prices, these states saw huge decreases in a very short period of time.

Downtown Denver skyline in front of the Rocky Mountains

Source: Raymond Boyd/Getty Images

Indiana and Florida’s averages both dropped by 10 cents, Idaho and Utah by 11 cents, and the state of Colorado saw a 12 cent decrease last week.

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It’s a Great Time to Be an American on the Road

AAA Spokesperson Andrew Gross explained, “More than half of all U.S. fuel locations have gasoline below $3 per gallon. By the end of the year, the national average may dip that low as well.”

Traffic travels through downtown Chicago, Illinois

Source: Scott Olson/Getty Images

Which among high costs of homes, groceries, and general cost of living, is quite the gift this holiday season.

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