Enjoy those lower gas prices, but a bottom is starting to form

U.S. gas prices have been falling quite steadily since hitting a 2023 high of $3.881. 

In fact, as of Sunday (Dec. 3), the U.S. national average price was $3.243 a gallon, according to the American Automobile Association's Daily Fuel Gauge report. That's down 16.4% from the Sept. 18 peak -- and 35.3% from the 2022 peak price of $5.016.

Prices should continue to fall into the beginning of 2024. But that assumes global oil prices will continue to fall until refiners start to prepare for the summer driving season. This is not, however, a certainty. 

The one-day gas price rally

To wit: On Dec. 1, the AAA price went UP. Just a 0.2 cents a gallon to $3.248, but it came after the price held at $3.46 for three days. 

The cause of the blip was that the Organization of Petroleum Exporting Countries and the OPEC+ group were meeting on Nov. 30 to agree on production quotas on crude oil. 

Oil prices had started to rise after Thanksgiving in expectation of strong production cuts. 

Related: New report highlights a major speedbump to mass electric vehicle adoption

The cartel, in fact, agreed to continue cutting back production. But the decision came with a caveat. The cuts are voluntary. (Technically, the issues members were required to pledge to abide by the cuts). This means no one is formally bound by the agreement, and many OPEC members may sell more oil than allowed under the cartel's quota system.

Once oil traders realized that reality, oil prices fell nearly 5% over the next two days. And AAA saw that decline pushing pump prices lower on Dec. 2 and Dec. 3. 

Gas prices are seasonal and political

Gasoline prices are seasonal, falling in the fall and into winter. They push higher after the first of the year into spring and early summer when vacation driving picks up in the northern hemisphere and refiners change their ingredient mixes, adding some chemicals to reduce the volatility of the gasoline. 

Making the situation more complex, oil prices, which account for about half of the cost of a gallon of gas, are volatile and subject to geopolitical forces as well as economic. 

A solution to the drain on your wallet is to buy an electric or hybrid vehicle. But prices are high, and demand is intense for hybrid cars. 

So, in the short term, watch the fallout from drone attacks on multiple ships, including a U.S destroyer, in the Red Sea near its outlet into the Gulf of Aden on Dec. 3. The attacks were launched, apparently, by Yemen's Houthi rebels, who have been supporters of Hamas in the group's war with Israel. 

The lowest prices in the United States are currently in Texas, where prices are approaching $2.60 a gallon. The highest prices are in California, which averages $4.806 a gallon. The highest price is in rural Mono County at $6.46.