Gasoline prices are poised to end the year at 2023 lows. How does less than $3 a gallon sound?

Drivers can expect to end 2023 with gasoline prices around their lowest levels of the year. On Tuesday the national average price of gasoline was $3.08 per gallon, according to AAA data.

It could go lower.

Some analysts are predicting the national average will move below $3 per gallon sometime soon. "Last year saw a similar gasoline price swoon in December but this year’s version has much more breadth," said Tom Kloza, global head of energy analysis at OPIS.

Already, fueling sites in at least 28 states are offering gasoline below $3 per gallon, up from 11 states only a month or so ago. OPIS data indicates that 60% of US fueling sites now have gasoline available for less than $3 per gallon, while some individual states are flirting with $2.50-per-gallon levels.

Part of the price decline in recent months is seasonal, as demand slows during the colder months. A winter blend that is less expensive to produce is also a factor. Lastly, gasoline supplies have been increasing since refineries came back online following maintenance.

Another factor: Government data released for the first week of December showed gasoline inventories rising by more than 5 million barrels versus estimates of 1.3 million.

“The savings for consumers is substantial,” said Kloza. “When US gasoline prices soared over $5 per gallon in June 2022, consumers were spending about $1.9 billion per day. At today’s lower numbers and adjusting for lower off-season demand, those expenses are about $775 million lower per day.”

Fed friendly

The steady move down in driving fuel prices since mid-September has played a big role in cooling inflation over the last couple of months. The energy index fell 2.3% in November over the prior month with gasoline prices declining 6.0% during that period.

Gasoline hit all-time highs just above $5 per gallon in June 2022. This year’s prices peaked at $3.87 per gallon in September. They have been slowly coming down almost on a daily basis ever since.

It's not uncommon for prices to reach their lowest levels around December and January. But once spring arrives — and drivers hit the road — fuel prices are expected to rise again. The Energy Information Administration forecasts gasoline will average $3.36 next year, compared to $3.53 in 2023.

The EIA also expects gasoline demand to fall by 1% in 2024, which would translate to the lowest per-person gasoline consumption in two decades.

“Relatively high gasoline prices and persistently high inflation may be affecting consumer budgets and reducing discretionary driving,” per the agency's November energy outlook report.

Crude, the underlying commodity for gasoline, is down more than 21% from its late September peak. The downward trend comes despite deeper production cuts announced by the oil alliance OPEC+.

Prices have gone through volatile moments amid conflict in the Middle East. Over the past two sessions, prices rose more than 3% after BP oil giant and several cargo companies said they would pause shipments via the Red Sea due to Houthi rebel attacks.

On Tuesday, West Texas Intermediate (CL=F) was trading just above $73 per barrel. Brent (BZ=F) crude was also hovering above $79 per barrel.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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