Oil prices have crashed to 4-year lows. That means cheaper gas for Americans hitting the roads this summer.
The decline was sparked by OPEC's plans to increase oil supply by 411,000 barrels per day in June.
Americans can expect gas prices to drop below $3 a gallon this summer, an analyst said.
Oil prices are in free-fall, just in time for the busy summer driving season.
US Crude prices dropped 2% on Monday to $57.10 a barrel, hitting the lowest level since February 2021, when the economy was still in the midst of the COVID-19 pandemic.
While that's not great news for oil producers, drivers are bound to get some relief from the plunge in crude prices in 2025.
Data from GasBuddy shows the median US gas price per gallon is $2.99, up three cents from last week, while the average is $3.12, up two cents from last week.
Falling oil prices typically translate into lower prices at the gas pump, and that's likely to happen with crude's latest plunge, but with a lag, Patrick De Haan, head of petroleum analysis at GasBuddy, said.
"While gasoline inventories have been tightening due to ongoing refinery maintenance — which has limited how much gas prices have fallen in response to lower oil — refinery output is expected to rise soon," De Haan said in a note on Monday.
Refinery maintenance is set to wrap up in the near term, De Haan said. This should increase the gasoline supply and cause the national average gasoline price to dip below $3.
Falling prices at the gas pump would be welcome news for American drivers as they head into the summer vacation season—and what's good news for the consumer is good news for the economy.
JPMorgan estimates that roughly 80% of consumer savings from lower gas prices are spent elsewhere, and that a dollar swing in gas prices can translate into tens of billions of dollars of consumer firepower a year.
Monday's price decline came after a weekend OPEC+ meeting, in which the group of 8 oil-producing countries said they would increase the supply of oil for the month of June by 411,000 barrels per day.
The increasing supply of oil set to hit the market comes at a time when demand is expected to weaken due to a slowing global economy, suggesting that oil prices can keep falling.
"The solution to low prices is low prices," Rob Thummel, senior portfolio manager at Tortoise Capital, told BI.
Thummel said he expects oil prices could fall to the low $50s per barrel in the short term, before stabilizing in the $60 to $80 per barrel range.
That's because pumping oil when prices are below $60 is unprofitable for most countries.
"The IMF estimates the breakeven oil prices needed for OPEC members to balance their budgets is higher than $80 per barrel for most countries except for United Arab Emirates," Thummel said.
Low oil prices could wash out producers and ultimately lead to a decline in supply, which would help spark a rebound in prices.
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