The U.S. fuel market is on the verge of a significant correction. My analysis indicates that the average price of gasoline could drop below the $3 per gallon mark as early as the November midterm elections. The historical price pattern after reaching the $4 level suggests a pullback to $2, and current market trends are working in favor of this scenario.
The U.S. administration has clear political incentives to lower prices at the pump. But it's not just about politics—fundamental market factors have already begun to favor buyers. The autocorrelation caused by the recent price surge only amplifies this effect.
Falling Demand as the Key Trigger
The key signal is consumption dynamics. Gasoline demand was declining even before prices soared to current levels, and this is happening against the backdrop of a stable U.S. economy. As of July 2, gasoline cost about $3.8 per gallon, which, in my view, is clearly overpriced given declining demand.
The 12-month moving average of oil and liquid fuel consumption for motor gasoline, according to U.S. Department of Energy estimates, is heading toward 8.7 million barrels per day by 2027. This would be the lowest level since 2021. The price surge in the first half of the year is one reason, but the decline in demand was the prevailing trend even before the escalation of the conflict with Iran.
Connection to the Stock Market
Another important argument is the correlation with the stock market. Even a moderate decline in stocks could push gasoline prices to $2. The national daily average price has moved in tandem with the S&P 500 index relative to its 100-week moving average for about two decades. I call this pattern the "common chart syndrome."
This highlights the potential for autocorrelation to drive fuel prices down in the second half of the year. In other words, if the stock market pulls back, gasoline is highly likely to become cheaper as a result.
Conclusion: three factors—the historical pullback pattern after $4, falling demand, and the connection to the stock market—form a powerful bearish consensus for gasoline in the U.S.
As an analyst, I believe the current situation resembles a classic "overheating and correction" cycle. The fuel market could become one of the main beneficiaries of a macroeconomic slowdown, if it materializes in the second half of the year. Investors should closely monitor demand data and the dynamics of the S&P 500—these indicators will provide an early signal of the move toward $3 and below.