U.S. gas prices are expected to fall below $2 per gallon, a new report from the Energy Information Administration shows.
According to agency’s short-term energy outlook released Tuesday, the EIA has lowered its forecast for national average gas prices to $1.95 a gallon in the fourth quarter, which is down from last month’s forecast of $2.07 a gallon.
These prices are expected to begin in October and stay below $2 a gallon until February, according to the report.
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EIA’s most recent forecast can be broken down into two components, according to Timothy Hess, the lead analyst for the short term energy outlook.
The first component is a reflection of Brent crude oil prices, which the EIA predicts will be $2.65 per barrel, or 5 cents per gallon, lower in October than they were in July, he said.
The second component has to do with gasoline refining margins, which is the difference between the spot price of gasoline on the wholesale market and the price of crude oil, Hess explained. Those prices are forecast to fall by almost 20 cents per gallon from last month to October.
“This drop in gasoline margins is typical during autumn, as less driving reduces seasonal demand for gasoline, and refiners switch to producing ‘winter-grade gasoline,’ which is less costly to produce than the summer grade variety,” he said.
The agency also lowered its U.S. oil-price forecast, docking its predicted price of $43.57 a barrel in 2016 to $41.16 a barrel this year. As for next year’s prices, the EIA has lowered its forecast from $52.17 a barrel to $51.58 a barrel in 2017.
Aside from lowering gas and oil price forecasts, the EIA also reported a decrease in overall U.S. oil production. National oil production fell by 180,000 barrels a day, sliding to 8.57 million barrels a day in July, the lowest level since April 2014.