The Energy Department again slashed its prediction for next year’s average price of gasoline across the U.S., this time to $2.60 a gallon. That would be 23 per cent below this year’s projected average and the lowest full-year average since 2009.
If that comes to pass, the price drop will save U.S. drivers $100 billion over the course of the year based on current consumption levels. That will boost the overall economy by reducing shipping and transportation costs, and leaving consumers more money to spend on other things.
In its most recent short-term energy outlook, released Tuesday, the Energy Department’s Energy Information Administration cut its gasoline price forecast for 2015 by 35 cents a gallon. It was the second time in two months that the EIA cut the forecast by more than 30 cents a gallon.
The average national price of gasoline to $2.66 a gallon on Tuesday according to AAA, 61 cents less than last year at this time. The national average has fallen every day since September 26.
The steep drop in gasoline prices is a result of a drop in crude oil supplies. Global crude prices have fallen to around $66 per barrel from a June high of $115 per barrel. Global supplies are high thanks in part to rising production in the U.S., while global demand is relatively weak because of slowing economic growth in Europe and Asia.
The lower crude prices are forcing oil companies to scale back drilling plans for next year. As a result, the EIA trimmed its forecast for U.S. production growth. U.S. crude oil output is expected to rise by 300,000 barrels per day to 9.3 million barrels a day. The EIA had previously expected production to rise by 400,000 barrels per day.
Despite a colder than normal November, the EIA expects home heating costs to fall this winter compared to last year. Weather forecasters do not expect a repeat of last year’s consistently low temperatures, and prices for propane and heating oil are much lower than last year.