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Gas for less than $4 a gallon is now commonplace. Sub-$3 gas could be next

The national average for a gallon of regular gas was $3.96 on Monday, down just a fraction of a percent from where it was on Sunday. Still, that decline snapped a 62-day streak of falling gas prices.

The average price is slightly inflated by some high-price states like California, where the average is $5.37 a gallon. The national average price, the price at which half the country’s gas stations are selling more and half less, fell to $3.80 a gallon.

Every state is experiencing relief from higher prices. Even in states with high gas prices, such as California, the average price is down more than $1 a gallon from a peak in June.

In 28 states, the regular price is now $3.99 or less. Roughly two-thirds of the 130,000 gas stations nationwide sell for less than $4 a gallon. And many are selling for less than that. About 25% of stations nationwide are selling gas for less than $3.50 a gallon.

As students begin to return to school and the summer driving season comes to an end, gas prices are likely to drop further, said Tom Kloza, global head of energy analysis for OPIS, which tracks prices for AAA. By September or October, where it was when Russia invaded Ukraine in late February, the general national average could be below the $3.53 a gallon mark, he said.

And Monday wholesale gasoline futures for November and December deliveries showed retail prices for many states would fall below $3 by the end of the year, he said. But there is still a risk that unexpected gas price hikes could derail this good news for drivers, he said.

“We still don’t know what Putin is going to do, or whether we’re going to get a hurricane hitting the Gulf Coast,” he said of factors that could push gas prices up again.

The primary driver of the drop in gas prices was a drop in oil prices, which hit a six-month low in Monday’s trade, as futures fell another 4% on growing concerns about a global recession. Since June 8, oil futures have fallen between 24% to 28%, depending on the crude benchmark.
Recessions can take a huge cut from demand for oil and gasoline, as people lose jobs and don’t need to travel for work, or cut back on spending and travel less. In 2008, average gas prices fell 60% between a record price of $4.11 a gallon in July and the end of that year, as the meltdown of financial markets led to the Great Recession and massive job losses.
Monday’s decline was triggered in part by China’s central bank feeling forced to cut interest rates due to signs of a slowing economy there.

“The market has taken this as a bearish signal on the outlook for oil demand,” said Richard Joswick, head of global oil supply analysis at S&P Global Commodity Insights.

Gas prices fell below $4 for the first time in a month
There were also signs that there could be a new deal between the United States and Iran on nuclear weapons, which could clear the way for Iranian oil exports to return to the market. Kloza said this was a major factor in Monday’s decline in oil prices. Even though Iranian oil won’t start flowing freely until 2023, other experts see the Iran news as a factor that will lower oil prices.

“If a deal is reached with Iran, the implications for the oil market and Russia could be far-reaching,” Andy Lippo, president of Lippo Oil Associates, wrote in a note on Monday.

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