Gas prices are low. Will they stay that way?

Gasoline prices have fallen to just over $3 per gallon.

That’s good news for consumers and the Trump administration after President Trump promised to bring down prices, but it could complicate a “drill, baby drill” agenda.

And whether prices will stay low may depend on whether the administration’s sanctions on Russia are effective, experts say.

The national average gasoline price stood at $3.07 per gallon on Friday, according to AAA.  

That’s down from $3.16 a month ago and $3.15 a year ago.

It’s also very low compared to where prices were over the past few years, when spikes occurred because of Russia’s invasion of Ukraine and the COVID-19 pandemic recovery. At their highs, they reached more than $5 per gallon in the summer of 2022.

Analysts attribute the currently low prices to high levels of oil supply as OPEC+ nations bring more to the market.

“Over the last two years, OPEC+ has restored 2.2 million barrels a day of voluntary production cuts, and they’re in the midst of restoring another 1.65 million barrels a day over the next 10 or 11 months — and this is happening at a time when world oil demand growth has been lackluster,” said Andrew Lipow, president of Lipow Oil Associates.

“So the oil market, as we go into the last couple of months of the year, has become quite oversupplied, and that has resulted in lower oil prices, and consequently, for the consumer, lower gasoline prices,” Lipow said. 

Seasonal fluctuations may also be playing a role, as demand is typically lower after the end of the summer travel season.

The pricing slide could offer some relief to consumers who are being squeezed in other areas: Prices of goods such as beef and electricity are on the rise.

While a positive for consumers, low prices may be bad for the oil industry. Already, several major oil companies have announced layoffs. They’re also less likely to invest in new drilling operations.

“It’s going to be tough to convince people to ‘drill, baby, drill’ in the next 15 months,” said Tom Kloza, chief oil analyst for Turner, Mason & Company, said this week.

Kloza described the current situation as being in the bust part of a normal boom and bust cycle for industry.

“I think from 2027 to 2030, we’re talking about higher prices,” he said.

For now, the administration seems to be cheering the low oil prices.

“Energy is way down,” Trump told reporters this week. “I think you’re going to see $2 gasoline very soon.”

Interior Secretary Doug Burgum recently told 2WAY Tonight “we’re excited” about the low prices.

“We’re excited about the price of oil because if we get it down a little bit further, Russia’s going to go broke,” he said. 

Russia is one of the world’s largest producers of oil. Many countries stopped purchasing Russian oil after the country invaded Ukraine, but others have continued to buy it over the past few years.

The administration also appears to be taking advantage of the low price of oil, the main component of gasoline. The Energy Department announced this week that it would seek to buy barrels for the nation’s Strategic Petroleum Reserve.

However, President Trump’s recently announced sanctions on Russian oil is throwing some uncertainty into oil markets, which could drive up prices, especially if the sanctions are effective.

“Brent is surging because you have this increasing sanction by the Trump administration against Russia,” said Claudio Galimberti, chief economist at Rystad Energy. 

He said that if the sanctions are effective, it could lead to a sharp increase in prices — though he noted that previous sanctions were ineffective. 

The Trump administration has also sought to bolster U.S. oil and gas production, including by cutting environmental regulations, speeding up project reviews and opening more lands for drilling.

However, presidents can only have so much influence since investment decisions are made by private companies, take place on private lands and can be made years in advance. Some firms have also raised concerns about the administration’s tariffs.

Nevertheless, U.S. oil production is high, reaching a record 13.6 million barrels per day in July. That’s up from 13.2 million barrels last year.

Source: The Hill