$4.50, maybe $4.25.
That’s how low a regular gallon of gasoline could cost in California by the end of the year, said Patrick De Haan, head of petroleum analysis at GasBuddy, which tracks price trends.
The safer bet is $4.50, he said, but $4.25 is not out of the question. An average that low would likely mean “thousands of stations below $4,” he said.
Tuesday, the average price of a gallon of regular gasoline was $5.06 in California, still well above the nationwide average of $3.53.
Other Tuesday readings: Sacramento, $4.87; Fresno, $4.87; Modesto, $4.78; Merced, $5.03, San Luis Obispo, $5.30.
Nationally, De Haan saw the price falling below $3 this winter.
Gasoline prices tend to fall this time of year.
“Demand from drivers has fallen and we are seeing the impact of winter blend being introduced earlier than previous years. There are also signs of a slowing economy that is affecting overall demand,” said Gokce Soydemir, Foster Farms-endowed professor of business economics at Stanislaus State.
The Federal Energy Information Administration saw consumer demand dropping to its lowest level in two decades.
“U.S. motorists are driving less because they aren’t commuting to work every day, newer gasoline-fueled vehicles are more efficient, and there are more electric vehicles on the road,” said EIA Administrator Joe DeCarolis in a press release.
“Put those trends together with high gasoline prices and high inflation, and we find that U.S. motorists are using less gasoline,” he said.
Why do gas prices drop?
In California, the prices are affected by the switch to the less expensive winter product, a transition that occurred somewhat earlier this year. That helped send prices down.
Gov. Gavin Newsom on Sept. 27 directed the state Air Resources Board to “take whatever steps are necessary to allow for an early transition to winter-blend gasoline to be manufactured, imported, distributed, and sold in California.”
Prices have fallen dramatically in recent weeks — a month ago the state average was $5.64 — and more drops appear on the way. Soydemir saw prices tumbling until the end of this year and if the economy slows, perhaps the first quarter of next year.
The Federal Reserve has raised its key interest rates 11 times in the last 20 months to stem rising prices. But that also tends to slow demand and economic growth.
California’s gasoline prices are traditionally higher for several reasons. One is its motor fuel taxes, which are higher than in other states.
Its refineries produce a cleaner product to meet state environmental standards, and California does not have as much access as other states to interstate pipelines that can bring supplies to the state.
There are risks to the gasoline price forecast.
Notably, the economy could grow at a more brisk pace than expected. It grew at a surprisingly strong 4.9% annual rate this fall. In California, the UCLA Anderson forecast said the state’s economy is growing faster than the nation’s.
But, it warned, “the risks to the forecast are political and geopolitical,” particularly if interest rates remain at current levels.
De Haan thought the lower gasoline prices were a harbinger of a slowdown. He saw demand for motor fuel declining more than usual this time of year.
“That could be a sign things are slowing down,” he said.
Soydemir saw severe weather and the geopolitical situation as potential risks.
So far, the Israel-Hamas war has had no discernible effect on oil prices. But as De Haan said, “Iran could come out of left field,” and the politics of oil could tighten supplies.
And, said the Energy Information Administration in its outlook last week, “Risks of supply disruptions and price volatility are heightened amid potential conflict spreading in the Middle East.”
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