What to expect for gas prices in 2025
Gas prices have dropped sharply since spiking to record highs in mid-2022. GasBuddy expects Americans will spend $115 billion less on fuel than they did in 2022, however looming tariffs on Canada and Mexico remain a key risk. (Photo credit: Andrew Harnik/Getty Images via CNN Newsource)
New York (CNN) — More good news is coming to inflation-weary drivers: Gas prices are expected to drop in 2025 for the third straight year, according to GasBuddy projections shared exclusively with CNN.
GasBuddy, which has accurately forecasted gas prices the past several years, expects the national average for regular gas to fall to $3.22 a gallon next year.
That would mark a modest decline from about $3.33 in 2024 and mark the lowest annual average since 2021.
The forecast for muted prices at the pump is a far cry from the spike above $5 a gallon nationally in mid-2022, an unprecedented surge that rocked the American economy, crushed consumers and became the epicenter of the inflation crisis.
Based on the new forecast, GasBuddy expects Americans will spend about $115 billion less on fuel in 2025 than they did in 2022.
“2025 looks to continue the trend of slow-but-steady improvement at the pump,” Patrick De Haan, GasBuddy’s head of petroleum analysis, told CNN in a phone interview.
GasBuddy expects the national average will stay safely below $3.50 a gallon each month of 2025, even during the peak driving season of late spring and early summer.
The typical household is expected to spend $2,252 next year on fuel. That would be above the pre-Covid level of $1,952 in 2019 but well below the record high of $2,715 in 2022.
However, De Haan warned that this projection for tame gas prices could be disrupted by several X-factors, including President-elect Donald Trump’s threatened tariffs on Canada and Mexico.
“Trump is a bit of a wildcard. He tends to destabilize the status quo and that increases risk and makes it harder to predict prices,” said De Haan.
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Sub-$2 gas is unlikely
Gas prices, highly visible and difficult for many to avoid, play an outsized role in how Americans feel about the economy and their financial health. They serve as a real-time barometer for the cost of living and influence consumer psychology.
Trump has vowed to attack the cost of living by embracing American energy dominance. Trump wants to slash environmental regulations and ramp up permitting in an effort to boost the supply of oil and natural gas.
Although gas prices have dropped sharply from mid-2022, Trump promised on the campaign trail to make them go much, much lower.
“We’re going to get gasoline below $2 a gallon,” Trump said during a speech in September, though he did not specify when prices would fall that low.
However, industry veterans are highly skeptical of that claim – unless there is a recession or some other crisis on the way that crashes demand.
GasBuddy is forecasting prices will stay well above $2 a gallon throughout 2025. Even at the cheapest end of the range of possible monthly prices, GasBuddy only expects the national average to fall to $2.81 in December 2025.
“Our figures are not even on the same planet as what the President-elect has promised,” De Haan said. “We just don’t see the stars aligning for President-elect Trump to realize gas prices that low.”
Drill-baby-drill meets reality
Although Trump’s drill-baby-drill focus could boost domestic production, the United States is already pumping more oil than any nation in world history.
It’s not clear that production can go dramatically higher, nor that there is even demand for substantially more crude given how subdued prices are now.
Rob Thummel, senior portfolio manager at energy investment firm Tortoise Capital, told CNN that there is a risk unleashing too much supply will cause a glut, hurting energy prices and the oil-and-gas sector.
“This is why economics, not politics, will drive the energy sector,” Thummel said.
Of course, calls for gas prices to drop in 2025 could prove wrong if there is a natural disaster or geopolitical trouble that disrupts supplies.
For example, an even wider crisis in the Middle East that includes Iran or even Saudi Arabia could drive oil prices sharply higher.
What tariffs mean for gas prices
Another risk is that Trump goes forward with his threat to impose a 25% tariff on Canada and Mexico on his first day in office.
Yet Canada is the leading source of America’s foreign oil.
Last year, the United States imported 1.4 million barrels of Canadian crude oil per day, accounting for more than 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 lift retail gas prices by 30 cents to 70 cents a gallon.
But 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 not slap a 25% tariff on Canadian and Mexican oil.
Officials in Canada and Mexico have promised to respond to Trump’s threatened tariffs, raising the specter of a tit-for-tat tariff battle that derails the closely-integrated North American economy.
De Haan said a full-blown trade war would likely dent demand for fuel, driving prices lower.
“If we saw $1.99 gas,” he said, “it would be because of an economic calamity, not something Americans would cheer.”
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