U.S. gasoline prices have dropped to their lowest levels in more than four years thanks to a “drill, baby, drill” approach — in other countries.
Rising production from OPEC and its allies around the globe has helped to drive down crude oil prices, which in turn provide relief for Americans at the pump. AAA reported Tuesday that the average price for regular U.S. gasoline was $2.998 per gallon.
“U.S. oil producers do continue to slowly increase oil production,” said Patrick De Haan, head of petroleum analysis with the GasBuddy fuel-price-tracking service. “But the bigger story here really has to do with OPEC.”
Members of the cartel have been squabbling, he said. Yet the group known as OPEC+ has agreed to increase production for December, following other increases this year.
AAA said Monday that the U.S. gasoline average was just over $3 a gallon before reporting Tuesday that it had dropped below that threshold. The average hadn’t been that low since May 2021, said AAA spokesperson Aixa Diaz.
While details of gasoline price reports vary, the Trump administration is eager to point to lower fuel costs as it remains under pressure to address higher prices in other areas of the economy, from beef to electricity.
President Donald Trump sought to claim credit for the drop as he spoke to reporters during his Cabinet meeting Tuesday. He predicted that pump prices will keep dropping.
“We’re down at about $2.50 a gallon,” Trump said. “I think we’re going to get down to $2. We could crack that at some point.”
The president has also frequently touted the administration’s pro-drilling policies.
Prices vary widely by state because of different levies and gasoline infrastructure. Oklahoma’s average was just over $2.40 a gallon, AAA said Tuesday, while California was at $4.54 per gallon.
AAA’s highest recorded average price of $5.016 per gallon for regular U.S. gasoline came on June 14, 2022, during the administration of former President Joe Biden. It came the same year that Russia launched a full-scale invasion of Ukraine.
But the average U.S. price a year ago was just $3.047, AAA said Tuesday, or about a nickel more than the new $2.998 average. GasBuddy reported recently that “a few dozen stations” in the country have been selling gasoline for less than $2 a gallon.
Energy Secretary Chris Wright, a former oil and gas executive, told Trump during Tuesday’s Cabinet meeting that prices were down because of Trump himself.
“The biggest determinant of the price of energy is politicians, political leaders and policies — that’s what drives energy prices,” Wright said. “There are a number of stations in the heartland of America with $1.99 signs flying today.”
But De Haan said geopolitics are driving the market, not U.S. politics.
“OPEC is sick of ceding market share to U.S. and Canadian producers,” he said. “It’s all pretty much additional supply, right? It’s not additional supply from the United States. It’s additional supply being added to the world by OPEC.”
‘Downward pressure’
Trump has pushed for aggressive oil and gas development, clearing away regulations that crimp petroleum profits while going out of his way to block the wind and solar projects favored by Biden.
The United States became known as the largest oil producer in the world during Trump’s first term in office, and the increase continued for Biden’s four years. The latest U.S. Energy Information Administration production number, 13.84 million barrels per day in September, once again set a new record.
Parents watching the price of toys rise as Christmas approaches may be taking comfort in lower gasoline prices, though some people in the oil industry have been growing unhappy with the direction of oil prices.
They’ve watched the price of oil drop as Trump’s tariffs drive up the cost of steel and other supplies. West Texas Intermediate oil, a U.S. benchmark, settled Tuesday for less than $59 a barrel. That is below break-even prices in the range of $62 to $64 per barrel for parts of the prolific Permian Basin, as noted by EIA and the Federal Reserve Bank of Dallas.
EIA has said global Brent oil prices could average well below that range in 2026.
While production has been increasing for years, oil companies say continued low prices are causing them to start cutting back.
“The downward pressure on oil prices coupled with continued tightness in finding qualified labor in remote locations continues to pressure profitability and dividends,” an unnamed oil industry executive wrote in response to third-quarter energy questions from the Dallas Fed.
“Right now we are bleeding,” said another executive.
Beyond OPEC+ decisions, other factors have contributed to the drop in gasoline prices, such as refineries coming back online after maintenance. EIA has noted that prices often drop in winter as people drive less and environmental regulations no longer require the use of more expensive summer-grade gasoline in some areas.
Oil inventories have been growing globally and in the United States, and EIA expects them to keep rising through 2026, which puts more downward pressure on prices. OPEC+ countries may not continue production increases next year.
More broadly, De Haan said, the oil market is starting to balance out from the twin shocks of the Covid-19 pandemic that sent prices plunging and Russia’s ground war against Ukraine that sent prices surging.
“The Federal Reserve has been doing its job, trying to rein in inflation by making borrowing more expensive,” he said.
“U.S. consumers have slowed down their consumption. And various central banks worldwide have been fighting inflation, too,” De Haan added. “So, everyone’s been doing their part to slow down not only the U.S. economy, but the global economy, so that today’s supply is better matching demand.”
Reporter Carlos Anchondo contributed.
