One of Republicans’ biggest inflation cudgels against Democrats has evaporated

New York (CNN) — Americans faced a nightmare in June 2022: Gas prices spiked above $5 a gallon for the first time ever.

Record-high prices at the pump dealt a financial scare to consumers and created a political wound the Biden-Harris administration has struggled to mend ever since.

But now the situation has reversed. Gas prices, an in-your-face metric that many consumers view as a real-time barometer for the cost of living, are falling fast, just as millions of Americans head to the polls.

Gas is much cheaper in battleground states like Nevada and Arizona than a year ago. And for the first time since 2021, the national average has a real shot at plunging below $3 a gallon in the coming days.

“It looks like a very strong possibility that we’ll fall below $3 a gallon, perhaps in the next 7 to 12 days. There’s a sense of not if, but when,” Patrick De Haan, head of petroleum analysis at GasBuddy, told CNN in a phone interview.

It’s a crucial trend that undercuts one of the biggest arguments Republicans have used to hammer Democrats over the cost of living.

“$3-a-gallon is a huge psychologically important level. And it shows that we’re finally close to normalizing,” said De Haan.

Of course, the cost of living remains a major issue for millions of Americans. And former President Donald Trump continues to poll better than Vice President Kamala Harris on who voters trust more to handle the economy.

Although gas prices are down and the rate of inflation has cooled sharply, consumers are still hurting from years of price hikes.

The typical US household is spending $1,120 more per month to buy the same goods and services as January 2021 when Biden became president, according to Moody’s Analytics.

However, as Moody’s notes, that sticker shock is offset by the fact that the typical household is also making $1,193 more per month than January 2021.

Falling prices in battleground states

Trump has bragged about how gas prices were below $2 a gallon when he was in the White House.

Indeed, the national average dropped to as low as $1.77 in April 2020. But that was because demand crashed during the pandemic. Very few people could take advantage of the dirt-cheap fuel because of the once-in-a-century health crisis.

After Russia invaded Ukraine, oil prices skyrocketed due to fears of massive supply disruptions. That catapulted prices at the pump to as high as $5.02 a gallon in June 2022.

Now, the national average stands at just $3.13 a gallon, according to AAA. That’s down from $3.50 a gallon at this point last year.

Drivers rolling up to gas stations in some battleground states are enjoying significant price drops, including Nevada (79 cents cheaper than a year ago), Arizona (78 cents cheaper), Pennsylvania (36 cents cheaper) and Wisconsin (32 cents cheaper).

Oil plunges after Israel attacks Iran

Gas prices could be poised to fall even further in the coming days because the oil market is melting down again.

US crude plunged 6% on Monday to $67.38 a barrel following Israel’s retaliatory attack on Iran over the weekend.

Normally, an attack like this would send crude spiking. But the oil market is breathing a huge sigh of relief because Iran’s oil facilities were spared. As were Iran’s nuclear sites.

The oil market is betting further escalation will be avoided, easing fears of an all-out war that could have sent crude to triple-digits.

“That was about as calming a round of military strikes as you’ll ever see in the Persian Gulf,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. “It was the best possible scenario: It was limited, measured and designed to avoid energy infrastructure and a tit-for-tat situation.”

Record-setting US production

Now, the focus is shifting away from the Middle East (for now, at least) and back to the fundamental backdrop, which analysts say looks weak.

Not only is demand relatively soft, especially in China, but supply has been strong. The United States continues to pump record-shattering amounts of oil – more than any country in world history.

“Everyone who roots for higher prices is really worried about 2025 – and they should be,” said Kloza.

Citigroup dimmed its short-term price target on oil and warns that Brent crude, the world benchmark, will likely tumble to $60 a barrel by mid-2025.

“Whoever gets elected president is going to have a wonderful problem: How will they handle oil price deflation and how long can it persist?” said Kloza.

Gas swallows smaller portion of paychecks

Of course, something could change in the Middle East or elsewhere around the world that causes oil prices to spike again.

But for now the markets appear to be bracing for muted prices, a situation that should keep a lid on gas prices.

Although many Americans may miss the days of sub-$2 gasoline, the reality is that consumers are spending a relatively tiny portion of their paycheck on fuel these days.

Gasoline spending is projected to represent just 2% of real desposable income per capita in October, according to ClearView Energy Partners.

That would be the second-lowest October before a presidential election on record going back to 1980. The only lower period was during the pandemic.

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