The average price of gasoline in the US has dropped to $3.98 per gallon, a 38-cent decrease in the last month, according to AAA. This marks the first time gas prices have been below $4 in three months. The decline is attributed to falling crude oil prices, refineries switching to a cheaper blend of winter fuel, and a seasonal drop in demand for gas.
Despite the drop in gas prices, the overall cost of living remains high. Consumer prices in October increased by 0.4% from the previous month, according to the Labor Department. This is a larger monthly increase than forecasters had expected. Rising housing costs accounted for about a third of the monthly increase, while grocery prices also rose sharply during the month.
According to Patrick De Haan, petroleum analyst for GasBuddy, gas prices are expected to continue dropping. He predicts that by Thanksgiving, the national average could be $3.75 per gallon, assuming no geopolitical wild cards. However, gas prices are still at a record high for this time of year, about a dollar per gallon higher than when the US went to war with Iran.
Diesel prices have also fallen, but more slowly than gas prices. The average price of diesel fuel is $6.15 per gallon, down about 13 cents from a month ago. The high cost of diesel fuel is partly due to Russia's war with Ukraine, which has impacted the global supply of diesel fuel. Russia is a significant exporter of diesel fuel, but damage to its refineries has reduced exports.
The high cost of diesel fuel is also driving up the cost of heating oil in the northeast, as heating oil is similar to diesel. Mild fall weather has kept heating costs in check so far, but a blast of cold air could push heating oil prices even higher. Higher diesel prices also affect the cost of other goods that need to be transported by truck, train, or cargo ship.
Economist Mike Reid of RBC Capital Markets notes that higher freight costs are being passed through to consumers, particularly for heavily imported goods such as apparel, recreation goods, and IT equipment. Federal Reserve Chris Waller suggested that energy shocks could have more lasting effects on inflation than previously thought, and that the central bank may need to raise interest rates more aggressively to curb price hikes.
The inflation report did not include the typical annual comparison, due to the government shutdown last year, which idled price-checkers and prevented prices from October 2025 from being recorded. The Cleveland Federal Reserve Bank estimated that consumer prices in October were up 3.7% from a year ago, outpacing average wage gains of 3.1%. This is a significant reason for the high turnout in the recent midterm elections, with 49.1% of eligible voters participating.
Key points
- Gas prices have dropped below $4 per gallon for the first time in three months.
- Inflation remains high, with consumer prices up 0.4% in October.
- The high cost of diesel fuel is driving up the cost of heating oil and other goods.
