The average price of gasoline in the U.S. will be below $3 a gallon in 2015, the Energy Department predicted Wednesday. If the sharply lower estimate holds true, U.S. consumers will save $61 billion on gas compared with this year.
Economists say lower gasoline prices act like a tax cut, leaving more money for consumers to spend on other things. Consumer spending is 70 percent of the U.S. economy.
The department’s Energy Information Administration predicted in its most recent short-term energy outlook that drivers will pay $2.94 per gallon on average in 2015, 45 cents lower than this year.
Based on expected gasoline consumption, that’s a savings of $60.9 billion.
However, prices will soon take another jump at the pump in California because the state’s cap and trade program for transportation fuels, a regulation already approved by the California Air Resources Board that’ll increase the cost of gasoline from 15 cents a gallon to 76 cents a gallon.
It’s part of AB 32, a law requiring a sharp reduction of greenhouse gas emissions. It’s a state effort toward a sustainable, low-carbon future. The regulations already apply to industrial facilities and starting Jan. 1, 2015, for the first time, it affects consumers.
Drivers are now paying $2.92 per gallon on average across the nation, according to AAA, but late fall is often when the price of gas hits its low for the year. The EIA is now saying that these prices aren’t just a low point, but instead will be the norm next year.
The national average has fallen for 48 straight days and is at its lowest point since December of 2010. That was also the last full year when the average came in below $3 a gallon.
EIA administrator Adam Sieminski attributed the lower pump prices to lower prices for crude oil and weak fuel demand. The EIA lowered its forecast for global crude oil for next year by $18 a barrel to $83.
The global price of crude has fallen by $35 a barrel, or 30 percent, since late June and closed at $80.38 Wednesday.
Oil production around the world has been strong in recent years. A boom in the U.S. has pushed domestic production up 70 percent since 2008. At the same time, demand for fuels is growing more slowly than expected in Asia and Europe because of weak economic growth.
The U.S. economy is faring relatively well, but more fuel-efficient cars and changing driving habits are keeping domestic gasoline demand low. The EIA expects demand to fall slightly next year despite the lower pump prices.
The EIA also slightly lowered its prediction for growth in U.S. oil production because lower prices will force some drillers to cut back. Production is expected to reach 9.4 million barrels a day in 2015, down from a previous estimate of 9.5 million barrels per day. Still, that would be an increase of 4 percent over this year and the highest domestic crude production since 1972.