What to Expect for Gas Prices in 2025
Inflation-weary drivers can expect some relief as gas prices are anticipated to dip in 2025 for the third consecutive year. Projections suggest a decline in the national average for regular gas to $3.22 a gallon, marking the lowest annual average since 2021. This indicates a modest reduction from the approximately $3.33 expected in 2024.
Such a forecast is a far cry from the unprecedented surge above $5 a gallon seen nationally in mid-2022, which posed significant challenges to the American economy and consumer finances, becoming a focal point of the inflation crisis.
As per the new forecasts, Americans are expected to save about $115 billion on fuel in 2025 compared to 2022 expenditures. “2025 looks to continue the trend of slow-but-steady improvement at the pump,” noted Patrick De Haan, head of petroleum analysis at GasBuddy.
The national average is forecasted to remain comfortably below $3.50 a gallon each month in 2025, even during peak driving seasons like late spring and early summer. Households are expected to spend around $2,252 on fuel next year, above pre-COVID levels but well below the 2022 peak of $2,715.
Despite these optimistic projections, several unpredictable factors could disrupt gas price stability, including potential tariffs under President-elect leadership.
The Improbability of Sub-$2 Gas
Gas prices, due to their visibility and unavoidable nature, hold significant sway over American perceptions of the economy and individual financial health. They act as a real-time economic barometer that heavily influences consumer psychology.
Although gas prices have significantly decreased from their 2022 highs, certain promises suggest potential even lower prices. However, experts remain skeptical unless a recession or another crisis drastically reduces demand.
GasBuddy forecasts prices will consistently stay above $2 a gallon in 2025, with the lowest expected average being $2.81 in December 2025. “Our figures are not even on the same planet as what some promises suggest,” stated De Haan. “The alignment of factors required for such low prices doesn’t seem feasible.”
Impact of Increased Domestic Production
While efforts to boost domestic oil production could influence prices, the United States is already leading in global oil production. It remains uncertain if production can significantly increase or if there’s demand for even more crude given current subdued pricing.
Energy experts caution that an oversupply could create a glut, potentially harming energy prices and the oil-and-gas sector. “Ultimately, it is economics, not politics, that will drive the energy sector,” remarked Rob Thummel, senior portfolio manager at an energy investment firm.
Predictions for lower 2025 gas prices might still be overturned by unforeseen events such as natural disasters or geopolitical tensions disrupting supply. For instance, issues in the Middle East involving countries like Iran or Saudi Arabia could potentially drive oil prices higher.
Tariffs and Their Potential Impact
Another factor introducing uncertainty is the potential imposition of a 25% tariff on Canada and Mexico, major suppliers of foreign oil to the United States. In the past year, the US imported substantial quantities of crude from these countries, making them integral to domestic supply chains.
GasBuddy estimates that such tariffs could elevate retail gas prices by 30 to 70 cents a gallon, potentially causing an unfavorable spike. Therefore, current forecasts assume that such tariffs will not be enacted to avert negative voter perceptions upon taking office.
Should a trade war develop, it could dampen fuel demand, paradoxically driving prices lower. Extreme scenarios, such as $1.99 gas, would likely signal economic turmoil, not an outcome American consumers would celebrate.
Ultimately, while projections provide a hopeful outlook for 2025 gas prices, they remain inherently susceptible to numerous unpredictable economic, political, and environmental variables. This nuanced landscape underscores the complexity of forecasting fuel prices in the ever-evolving global economy.
