The holidays have come early for US drivers.
Gas prices are at the lowest they've been in 33 months and are projected to near the $3 mark as the year comes to an end. A combination of ample domestic supplies and light demand are keeping prices low.
About 1 in 4 gas stations across the US are already selling gas for less than $3 a gallon. Six states – Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas – already have average gas prices below $3 a gallon. Missouri motorists are paying the least: an average $2.82.
Falling prices put cash back in the pockets of consumers, but it may not be enough to spur a strong holiday shopping season this year. Most forecasts suggest only a modest increase in holiday spending as the effects of the Great Recession continue to linger.
"Less expensive gas prices are providing welcome relief to motorists in every state and Washington, D.C.," wrote Avery Ash, manager of regulatory affairs for AAA, the national motor club based in Heathrow, Fla. "Weekly declines have been most dramatic in the Midwest and Great Plains states, where gasoline demand remains weak and supplies remain comfortable," Mr. Ash wrote in an analysis earlier this week.
Gas prices across the US averaged $3.19 a gallon Wednesday, according to AAA. That's down four cents from a week ago and a quarter less than what gas prices averaged a year ago.
The national average has declined for 10 consecutive weeks, dropping 41 cents since Labor Day. That's when many motorists make their final big road trip of the year and demand for gasoline begins its seasonal slide.
It could give a boost to retail sales this holiday season, although forecasts are sluggish. Holiday spending will rise by only 2 percent this year, according to Nielsen, a consumer analytics company based in New York. A fifth of American consumers say they have no spare cash, according to Nielsen, and more than two-thirds say they feel like they're still in a recession.
Drivers can thank low oil prices for much of the drop in gas prices. A boom in US oil production has filled US inventories while a cutback in driving and more efficient cars have driven down demand. That's kept US oil prices below $100 since Oct. 22.
But oil prices are still historically high, which puts a floor beneath gas prices. Average gas prices have remained above $3 for nearly three years, and it looks like it will continue that way for the rest of 2013.
"While AAA does expect the national average price at the pump to continue to fall approaching the end of the year, and many motorists will enjoy local prices below $3 per gallon, the national average is unlikely to breach this threshold," Ash wrote.