The American fuel market is on the verge of a significant correction. Based on an analysis of long-term trends and macroeconomic indicators, I see compelling arguments that US gasoline prices could fall below the $3 per gallon mark by the November midterm elections. The historical market pattern after reaching the $4 level points to a possible pullback to $2, and the current environment only strengthens this scenario.
Fundamental Shift: Falling Demand
The key factor I highlight is the sustained decline in gasoline consumption, which began even before the recent price spike. Data from the US Department of Energy shows that the 12-month average of oil and liquid fuel consumption is steadily moving toward 8.7 million barrels per day by 2027. This would be the lowest level since 2021. Meanwhile, the current price of around $3.8 per gallon, in my view, is clearly inflated against this downward trend. The price increase in the first half of the year only accelerated the process, but the trend of declining demand was dominant even before geopolitical tensions escalated.
Correlation with the Stock Market
The second crucial aspect is the close relationship between gasoline prices and stock market dynamics. I observe that the average daily fuel price moves in sync with the S&P 500 index relative to its 100-week moving average. This phenomenon can be called the "common chart syndrome." Even a moderate correction in the stock market, which looks increasingly likely in the second half of the year, will highly likely drag gasoline prices down with it. In the event of a potential stock market pullback, fuel will become cheaper as a result.
Political Incentive and Historical Pattern
The political factor should not be dismissed. The current administration has clear incentives to push for lower fuel prices before the elections. However, beyond political will, there is also a purely market-driven historical pattern: after reaching the $4 per gallon mark, the market almost always pulled back to $2. This cyclical trend, combined with falling demand and a potential stock market correction, creates a "perfect storm" for price declines.
My conclusion: The synergy of three factors—long-term demand decline, high correlation with the stock market, and the historical pullback pattern—makes the scenario of US gasoline prices falling below $3 not just likely, but practically inevitable. Investors in energy assets should prepare for volatility, while consumers can expect significant budget relief by the end of the year.