U.S. gas prices fall below $4 for first time since July

Americans may finally find some relief at the pump.

The national average price of regular gasoline fell below $4 a gallon for the first time since July, hitting $3.9788 on Tuesday, according to AAA. Prices are down about 17 cents from a week ago and almost 39 cents from a month ago.

This drop comes after a significant slowdown in energy inflation in October. Energy prices rose 0.7% during the month, a far cry from the 5.2% increase seen in September, according to the Bureau of Labor Statistics. The BLS gasoline index increased 1% for the month, after increasing 9.1% in September.

Bespoke Investment Group pointed out that gas prices also tend to fall this time of year, part of recent seasonal relief.

“While lower oil prices have been a contributing factor to relief at the pump, it is also completely normal for gas prices to fall at this time of year, so if that were not the case there would be something seriously wrong,” the company said.

Oil and inflation

The drop at the pump follows a sharp decline in crude oil. The price of Brent crude oil, an international benchmark, briefly fell below $90 a barrel on Tuesday for the first time since August, as comments from US President Donald Trump fueled hopes of an end to the nearly nine-month conflict between Washington and Iran.

Resumption of oil flows from the Persian Gulf has also eased supply concerns. Regional crude exports have returned to around 80% to 85% of their pre-war levels, including pipeline shipments, according to ING.

“Energy markets remain under pressure as hopes of a de-escalation in the Middle East reduce geopolitical risk premia. Oil extended its losses as Gulf supply flows continued to recover, while European gas also fell,” ING analysts wrote.

However, Federal Reserve Governor Christopher Waller warned Tuesday that energy shocks could have more persistent effects on inflation than before the pandemic.

“While I am pleased to see energy prices falling from last week’s high levels, they remain quite high compared to the start of the year, and the ultimate effect on inflation will depend on whether levels remain,” he said.