Gas prices plummet as some states fall below $3 a gallon

U.S. households are suffering the pinch of fast-rising prices for everything from biscuits to rent to men's underwear, government data shows.

But one major expense has offered welcome relief in recent weeks: gasoline.

The national average price has dropped about 35 cents a gallon from a 2023 peak in mid-September, sliding to a current level of $3.52, AAA data shows. That amounts to a more than 9% decline over the last month.

In Georgia and Mississippi, the states with the lowest gas prices, the average price per gallon has dipped below $3, according to AAA.

"More [states] will follow in the next few days," Andrew Gross, an AAA spokesperson, told ABC News, adding that he expects a continued decline in the national average.

Texas, Louisiana, Alabama and South Carolina are seeing average gas prices below $3.10 a gallon, AAA data shows.

In California, the state with the highest gas prices, the average gallon has fallen 57 cents over the last month and drawn close to $5.30, according to AAA.

The decline in gas prices owes in large part to a steep drop in the cost of crude oil, the underlying commodity that refineries turn into gas, Severin Borenstein, a professor at the University of California, Berkeley who studies the energy industry, told ABC News.

The price of Brent crude oil, a key industry metric, has fallen nearly 9% over the past month.

"We've seen a very recent drop in crude oil prices," Borenstein said.

Meanwhile, demand for gas has fallen as the busy summer traveling season has given way to an autumn slowdown, putting additional downward pressure on prices.

Even more, gas consumption has dropped below typical fall levels, possibly due to higher-than-usual gasoline prices and elevated inflation eating away at disposable income, according to the U.S. Energy Information Administration, or EIA, a government agency.

Demand for gasoline has slid beneath the lows experienced in 2020 amid stay-at-home orders imposed to address COVID-19, the EIA said.

Diminished demand has lowered the profit margin derived from the difference in the cost of crude oil and the sale price of gasoline at the pump. That dynamic has driven gasoline prices down even further as crude oil costs fall and refiners take smaller profits, Borenstein said.

"That margin typically drops from the middle of the summer to December," Borenstein said. "That's been the pattern over the last 20 years."

The price declines will continue because a drop in crude oil costs typically takes a few weeks to impose its full downward effect on the price of gasoline, Borenstein said, estimating that the national average could drop another 15 cents by the end of 2023.

Still, Borenstein added, the volatile price of oil could instead move back up, especially amid the Israel-Hamas war.

A potential escalation of the Israel-Hamas war and the possibility that it could widen into a regional conflict could send gas prices above $5 a gallon, economists and oil industry analysts previously told ABC News.

Gross, of AAA, agreed with the overall sunny outlook from Borenstein, saying more gas price relief will arrive as households enter the end-of-year gift season.

"Prices will keep up their annual decline into the holidays," he said.