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How plummeting oil prices will affect drivers this Thanksgiving

MarketWatch logo MarketWatch 11/15/2018 Jacob Passy

Oil prices have fallen considerably in recent weeks — and that as already had an impact on gas prices, which is good news for motorists looking to travel this Thanksgiving.

Currently, the national average gas price is $2.68 a gallon, according to data from AAA. While that’s higher than the price drivers paid at the pump last Thanksgiving — the average was $2.52 a gallon a year ago— it’s considerably lower than this year’s high of $2.97 a gallon on average around Memorial Day.

All told, some 48.5 million Americans are expected to hit the road over the next week, said Jeanette Casselano, spokeswoman at motorist group AAA. But that number could increase.

“With prices falling so noticeably the last couple weeks, I’d expect more last minute trips to happen,” said Patrick DeHaan, head of petroleum analysis at online fuel price provider GasBuddy.

Related video: Thanksgiving Holiday Travel Is Going To Busy This Year (provided by CBS Miami)

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Of course, prices vary significantly regionally. In Western states like California, Oregon and Washington, the average price per gallon is still well above $3, versus less than $2.40 in states like Texas and Missouri, per AAA.

Since the beginning of October, gas prices have fallen more than 20 cents on average nationwide and may continue to drop further “People will have more cash in their pocket around the holidays,” Casselano said.

Overall, drivers are saving roughly $95 million a day since early October thanks to lower gas prices, DeHaan said. Gas prices do lag oil prices — so DeHaan expects that the current slump in gas prices will continue at least for another week or two, at which point a rebound could happen just ahead of the Christmas and New Year’s holidays depending on what happens in oil markets in the weeks ahead.

Whether drivers do find a deal though will very much depend on which gas stations they go to — and motorists could be handsomely rewarded by searching for the lowest price available. “I can’t think of a Thanksgiving that saw such volatility in prices,” DeHaan said. “Some gas stations are dragging their feet on cutting prices, and some are passing it along much faster.”

Geopolitical factors play a role in prices at the pump

How much drivers pay for gas during the holiday season will also depend on some geopolitical factors. The Trump administration has granted waivers to allow some oil purchasers continue imports of Iranian oil despite the reestablished sanctions on Iran’s energy sector. A change to those waivers could have a serious impact on the market.

At the same time, concerns are rising among OPEC members about a global glut of crude oil, which could prompt them to cut production. And stateside, pipelines are filled with light crude oil from Texas and North Dakota. That could lead to an over-supply closer to home since demand for that form of oil, which is primarily used to create gasoline, is lower during the winter months given that fewer people are on the roads.

While drivers are saving money at the pump, other trends in the energy sector could be hurting their wallets. While there is an abundant supply of light crude, the heavier form of crude is harder to come by thanks to the tensions in Iran and capacity issues in Canada. Heavy crude is used to produce diesel fuel and heating oil.

Consequently, folks across the country who rely on this oil to heat their homes could feel the pinch. Last year, the average price for heating oil in mid-November was $2.65 a gallon, but this year it’s $3.30, DeHaan said. “Depending on when people locked in their prices, it’s going to be more expensive for those who heat their homes with heating oil especially in light of the bout of cold weather across the Eastern U.S.,” DeHaan said.

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