Anticipated Gas Costs in 2025: A Look Ahead
GasBuddy, known for its accurate gas price forecasts, predicts the national average for regular gasoline to decrease to $3.22 per gallon in the subsequent year. This would represent a slight decrease from around $3.33 in 2024, marking the lowest annual average since 2021.
The anticipated modestly-priced fuel at the pump is a stark contrast to the peak of over $5 per gallon nationally in mid-2022, an unusual escalation that negatively impacted the American economy, burdened consumers, and became the centerpoint of the inflation dilemma.
Based on this forecast, GasBuddy estimates that Americans will spend approximately $115 billion less on fuel in 2025 compared to 2022.
Patrick De Haan, GasBuddy's petroleum analysis head, shared this forecast with CNN, stating, "2025 looks set to continue the trend of gradual improvement at the pump." According to De Haan, the national average will remain below $3.50 per gallon every month of 2025, even during the peak driving season of late spring and early summer.
The typical household is expected to spend $2,252 on fuel in 2025. Although this is above the pre-Covid level of $1,952 in 2019, it is significantly lower than the record high of $2,715 in 2022.
However, De Haan issued a cautionary note, stating that various uncertainties, such as Donald Trump's proposed tariffs on Canada and Mexico, could disrupt this prediction of modest gas prices.
De Haan remarked, "Trump is something of a wildcard. He tends to disrupt the established order and makes it more challenging to predict prices."
Sub-$2 gas unlikely
Gas prices, highly noticeable and difficult to avoid for many, play a significant role in shaping Americans' perspectives on the economy and their financial status. They act as a real-time gauge for living costs and influence consumer psychology.
Trump has pledged to tackle the living cost by championing American energy dominance. Trump advocates for reducing environmental regulations and increasing permitting to promote oil and natural gas production.
Although gas prices have dropped significantly from mid-2022, Trump promised during his campaign to drive them much, much lower.
"We're going to get gasoline below $2 a gallon," Trump declared during a speech in September, without specifying when prices would fall to that level.
However, industry experts are highly skeptical of this claim, unless a recession or some other crisis occurs that reduces demand.
GasBuddy anticipates prices will remain well above $2 per gallon throughout 2025. Even at the cheapest projected monthly prices, GasBuddy only expects the national average to decrease to $2.81 in December 2025.
"Our projections are not even in the same ballpark as the President-elect's promise," De Haan stated. "We just don't see the conditions aligning for President-elect Trump to achieve gas prices that low."
Drill-baby-drill confronts reality
Although Trump's drill-baby-drill focus could stimulate domestic production, the United States is currently pumping more oil than any nation in history.
It's unclear if production can significantly increase, or if there's even a demand for a substantial increase in crude oil given the current subdued prices.
Rob Thummel, senior portfolio manager at energy investment firm Tortoise Capital, shared this view with CNN, stating that flooding the market with excess supply could cause a surplus, negatively impacting energy prices and the oil and gas sector.
"This is why economics, not politics, will determine the energy sector," Thummel said.
Of course, calls for gas prices to decrease in 2025 could be inaccurate if a natural disaster or geopolitical conflict disrupts supplies.
For instance, a deeper crisis in the Middle East involving Iran or even Saudi Arabia could cause oil prices to soar sharply.
What tariffs mean for gas prices
Another risk is that Trump carries out his threat to impose a 25% tariff on Canada and Mexico on his first day in office.
Canada is the primary source of America's foreign oil imports.
Last year, the United States imported 1.4 million barrels of Canadian crude oil per day, accounting for over half of total oil imports. Another 733,000 barrels of Mexican crude were imported each day last year as well, according to federal data.
GasBuddy's De Haan estimates that a 25% tariff on Canada and Mexico would raise retail gas prices by 30 to 70 cents per gallon.
However, a spike in gas prices is the last thing Trump would want voters to see when he takes office.
That's why GasBuddy assumes in its 2025 forecast that Trump will ultimately choose not to impose a 25% tariff on Canadian and Mexican oil.
Officials in Canada and Mexico have threatened retaliatory tariffs, raising the possibility of a reciprocal tariff war that could disrupt the closely-integrated North American economy.
De Haan stated that a full-blown trade war would likely reduce fuel demand, driving prices lower.
"If we saw $1.99 gas," he said, "it would be due to an economic disaster, not something Americans would celebrate."
The anticipated modestly-priced fuel at the pump, due to lower gas prices, could significantly benefit various business sectors that rely heavily on transportation, such as delivery services and logistics companies.
GasBuddy's prediction of sustained low gas prices throughout 2025 could incentivize businesses to invest in fleet vehicles, contributing to a potential revival in the automotive industry and boosting the overall economy.
