Why are gas prices dropping in October 2023? How low will they go?

The average price per gallon of gasoline spiked in the third quarter of the year experiencing an unusual post-Labor Day rise. The higher price of crude oil and a lack of supply due to refinery issues helped drive up the cost at the pump for American drivers.

The former though gave investors whiplash this week with the US per barrel price plunged by 5.6 percent on Wednesday, the biggest one-day drop in a year. The market rout that started last week has continued and the average price per gallon is beginning to follow suit.

“You could say Christmas is coming early,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

“While the trend is likely to be a strong one to the downside, small issues here and there could temporarily delay the onset of lower prices, but for now, motorists need not be in any rush: lower gas prices are on the way for every US state in the weeks ahead.”

Why are gas prices dropping in October 2023?

Saudi Arabia and Russian have been curtailing production of crude since April to stabilize the price. The energy ministry from the former confirmed that it will continue its voluntary 1 million barrel per day supply cut until the end of the year while the latter will review its reductions in November. These measures in part helped drive the price briefly up to $95 per barrel last week with predictions of $100 or more.

However, a couple data points sent the price snapping back “in short, sharp fashion” like a taut rubber band. “A lot of speculative pressure is being let out of the tires,” lead oil analyst for the Americas at Kpler Matt Smith told CNN. The most recent being a government report this week showing that gasoline inventories unexpectedly shot up last week. That came on top of weak demand which could indicate weakness in the economy. However, some of the demand destruction could be the result of recent foul weather experienced in the Northeast according to Bob Yawger, director of energy futures at Mizuho.

How low will gas prices go?

So how low will gas prices go? Andy Lipow, president of consulting firm Lipow Oil Associates expects over the coming weeks to dip to $3.50. Others are more optimistic like Tom Kloza, global head of energy analysis at the Oil Price Information Service who told CNN that they could go as low as $3.25 per gallon by Halloween.

Even California, which has seen an exceptional rise in prices due to refinery issues, could see prices back below $6 soon “once all refinery snags are addressed and maintenance complete” and with the state allowing the immediate transition to winter gasoline blend.

“I would not be surprised to see prices even fall below $5 there later this year,” said De Haan.

“Gas price disinflation is probably going to be the story for the rest of the year,” said Kloza. But things could change at a moments notice should OPEC decide on further cuts.

“Enjoy the next four or five months and then be prepared for the roller coaster to go back up next spring,” Kloza added.