Gasoline prices have dropped and may get lower in 2025

GasBuddy boldly proclaims Americans will spend $12 billion less on gasoline this year compared with last. Its 2025 Fuel Price Outlook predicts the national yearly average for regular unleaded will drop 11 cents, to $3.22 per gallon, from last year’s norm of $3.33 per gallon.

“I don’t disagree with GasBuddy’s assessment,” said Karr Ingham, an Amarillo-based economist who serves as president of the Texas Alliance of Energy Producers. But he clarified his view, choosing to describe looming pump prices as “stable to potentially lower,” not continuing to fall.

“The reason is that there is little speculation at this point that crude oil prices will be appreciably higher in 2025—and it is crude oil prices that largely drive gasoline prices,” Ingham said by email. “There are a number of factors driving crude oil price expectations in 2025, but the short version of that story is that Chinese demand growth is tepid at best, and growth in other developing regions (India, for example) is offset in other locations.”

AAA Texas spokesperson Daniel Armbruster said the auto club avoids long-term projections on gas prices, as there are too many variables.

“For instance, Russia’s invasion of Ukraine and the impact that had on global oil prices, no one saw that coming,” Armbruster said by email. “Large-scale weather events also can have an impact.”

Breaking trends into smaller bites, Armbruster said, “We typically will see prices lower as we move past the holidays and later into January. Of course the annual switchover to summer-blend gas starts to occur in Spring and prices usually bump up a bit. Then fluctuate into Memorial Day and Summer.”

Waco had the third-lowest gasoline prices in Texas among 27 metropolitan areas for the week ending Thursday, according to AAA Texas. A gallon of regular unleaded typically fetched $2.49 a gallon, a figure bested only by Killeen-Temple-Fort Hood’s $2.48 and Lubbock’s $2.41.

The statewide average hit $2.66, while the national norm pegged $3.07.

“Over the recent holiday season, more than 100 million Americans embarked on road trips of 50 miles or more, leading to a slight uptick in gas prices across Texas and much of the country,” Armbruster said in a press release on the weekly gas price update.

Waco-based economist Ray Perryman said count him among forecasters predicting lower gas prices this year, but warned “the situation is highly volatile.” He said there are global hotspots where war and political instability could wreak havoc with production and supply chains, naming Russia-Ukraine, the Middle East, the Red Sea and Venezuela-Guyana in his email message.

Texas and Texans walk a tightrope on the oil and gas issue, with high prices bolstering the Texas economy, lower prices benefiting consumers.

Perryman said he does not expect major changes in oil and gas production this year, again subject to the uncertainties he mentioned.

“Obviously, a new administration in Washington could have some effect,” he said. “A more favorable regulatory environment is expected, which could have long-term benefits and encourage investment. On the other hand, some of the other proposed policies could have adverse effects and unintended consequences. On balance, I don’t expect any major short-term impacts as long as there is no major escalation in any global conflicts.”

Ingham said he wonders how the “drill, baby, drill” mantra will play out.

“There are reasons to believe companies are going to maintain discipline in capital investments and return profits to shareholders and investors rather than going crazy with new drilling,” Ingham said. “That said, there is really no reason to think production is going to fall, either, and in fact production is largely expected to increase modestly in 2025, which doesn’t point to a supply shortfall that would push prices upward.”

Ingham said, bottom line, he sees “continued affordability” in 2025.

“We are in a bit of a sweet spot for consumers, in fact—prices high enough to maintain abundant supply, and keep prices in check for end users. Not a bad consumer outcome at all,” Ingham wrote.

Patrick De Haan, head of petroleum analysis at GasBuddy, predicts Americans will spend $411 billion on gasoline in 2025, an 8% drop from 2024. He said most major cities will see per-gallon averages for regular unleaded peak at $4, though “West Coast cities such as Los Angeles and San Francisco could return to the mid-$5 per gallon range due to high fuel taxes, unique fuel requirements and other state mandates.”

De Haan also reported he expects diesel prices to decline in 2025, with a projected yearly national average of $3.48 per gallon.

“This reduction will benefit industries dependent on diesel, such as freight and agriculture, offering some respite from recent cost pressures,” he said.