Gas Prices Inch Toward a 5-Year Low. What’s Driving the Drop.

Year-end holiday travelers have some good news when it comes to retail gasoline prices. (Kayla Bartkowski/Getty Images)

Key Points

• Gasoline prices reached $2.89 a gallon on Tuesday, a level not seen since April 2021, because of increased supply and lower demand.
• Oil prices are at multiyear lows, with U.S. crude futures at $55 a barrel and global futures at $59 a barrel.
• Demand for gasoline has decreased by approximately 2% annually since 2021, influenced by improved vehicle fuel efficiency.

Holiday travelers are already enjoying a respite from otherwise high prices at the pump this year thanks to everything from an oversupply of oil to seasonally low demand.

Created with Highcharts 9.0.1National Average Gas PricesSource: AAANote: Prices are weekly averages for regular​unleaded gas.

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A gallon of regular unleaded gasoline cost $2.89 a gallon Tuesday, according to GasBuddy, which crowdsources prices at more than 150,000 stations in real-time. The last time gas prices were this low was in April 2021, nearly five years ago.

“The softer holiday pricing comes as refinery maintenance winds down and gasoline supplies rise, easing some of the pressure that typically builds earlier in the year,” GasBuddy petroleum analyst Patrick De Haan wrote Tuesday. “In addition, OPEC has been increasing oil production for much of 2025, pushing crude prices to multiyear lows in the weeks leading up to Christmas.”

While oil and gas prices don’t change in lockstep, they are closely tied since oil is the fuel’s main ingredient. Oil prices have dropped in the belief that supply will outpace demand even through 2027, says Oil Price Information Service chief oil analyst Denton Cinquegrana. So, too, have gas prices.

Futures contracts for U.S. crude oil are currently trading at just over $55 a barrel, with global oil futures trading at around $59 a barrel. Those are the lowest prices since around February 2021, although oil prices also fell after President Donald Trump announced new tariffs on imports in early April.

An end to the war in Ukraine could further increase global supply as sanctions against Russian oil are lifted.

“There is also the seasonality component to gasoline,” says OPIS’s Cinquegrana. “Winter grade gasoline is easier/cheaper to make. Also demand is soft this time of year.”

More broadly, demand for gas has fallen about 2% a year on average since 2021 as cars have become more fuel efficient. That trend could slow, however. Trump recently moved to roll back fuel efficiency standards.

Write to Anita Hamilton at anita.hamilton@barrons.com