U.S. gas prices dropped this week due to falling oil prices and tepid demand, according to AAA. However, geopolitical uncertainty in the Middle East could drive up oil prices.
The average price of gas dropped to $3.64 for the week ending October 12, a 12-cent drop from the week prior, according to the latest report from AAA.
Gas prices in the U.S. declined as concerns weighed on the oil market days after the ongoing armed conflict in Israel led to geopolitical concerns in the Middle East. The average price at the pump is 19 cents lower than a month ago and 28 cents less than a year ago.
The West Texas Intermediate (WTI) – an oil price benchmark – decreased by $2.48 to $83.49 at the close of Wednesday’s formal trading session. Oil prices spiked earlier this week after the events in Israel, however, they have since dropped. Additionally, gas demand increased from 8.01 to 8.58 million barrels per day last week, according to new data from the Energy Information Administration (EIA).
"As long as this war does not spread to include more countries in the region, the effect on the oil market will remain muted," AAA spokesperson Andrew Gross said. "Here in the US, there are now nine states with some county gas averages below $3 a gallon, and this number will likely increase in the coming weeks."
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Since last week, these 10 states have seen the largest decreases in their average gas prices, according to AAA.
Fuel costs in some states hover at just over 3 dollars a gallon. Here are the country’s top 10 most affordable markets.
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The annual inflation rate was unchanged from August at 3.7% in September, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS). However, on a monthly basis, inflation rose 0.4% in September, slightly above the 0.3% pace that economists expected.
Housing costs had the greatest impact on the monthly price increase in September, while gas costs also had a large impact on the gain in inflation. Gas costs have the potential to move prices higher as the situation in the Middle East continues to unfold.
The possibility of higher oil prices would likely have an impact on near-term CPI forecasts, according to Jim Baird, Plante Moran Financial Advisors’ chief investment officer.
"Once the impact of recent energy price volatility is stripped out, inflation still appears to be gradually receding, but at a pace that could frustrate both consumers and policymakers," Baird said. "A return to the [Federal Reserve's] 2% target still appears to be further on the horizon than most would prefer, although a more pronounced slowdown in the economy could change that picture quickly.
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