The department is forecasting a price of $2.60 per gallon. That would be 23 percent lower than the predicted average for 2014, the lowest since 2009. What that means to consumers is more money to spend for other things and a boost to the overall economy as the costs of transportation and shipping goods drop.
The average per-gallon cost of $2.66 registered in the last week of December is 61 cents less than a year ago, the agency reported.
At the root of the rapid decline is a drop in crude oil supplies worldwide. Global prices were down to $66 per barrel after hitting a high of $115 per barrel last June. Rising production in the U.S. contributed to high supplies around the globe. At the same time, slow economic growth in Europe and Asia has lessened demand.
Oil companies are trimming production plans for the coming year. U.S. crude oil production is expected to rise by 300,000 per day to a total of 9.3 million barrels. Before the precipitous drop in prices, the EIA had forecast a 400,000-barrel per day increase in production.
Home heating costs will fall this winter, according to the agency’s predictions. Weather forecasts do not predict a long period of low temperatures and prices for propane and heating oils are much lower.
The average savings to U.S. households for 2014 was $115. If prices stay low, as expected, the 2015 aggregate savings could be $75 billion. Gas prices are closely associated with consumer confidence, which is at its highest since the recession. The reduction in oil and gas prices contributed to better-than-expected holiday spending, according to Goldman Sachs.
South Carolina has had the cheapest gas for the past three years, at an average $3.10 per gallon. Missouri, Mississippi, Tennessee and Arkansas were next in line. Hawaii had the highest prices at $4.16 per gallon, followed by Alaska, California, Connecticut and New York.
The 2015 prices are expected to bottom out after the midpoint of the year and begin rising again.