U.S. gas prices fall to pre–Ukraine invasion levels, Dow jumps back up into bull market

The average price of gas in the U.S. fell to under $3.50 a gallon on Wednesday, AAA reports, making gas as cheap as it was before Russia's invasion of Ukraine in late February destabilized global energy. And GasBuddy, which tracks the price of gasoline, predicts prices could drop below $3 a gallon by Christmas, The Washington Post reports.

The price of gas "is the main signal consumers notice on inflation," Duke University economics professor Emma Rasiel tells the Post. "It is the one thing they are likely to track, how much it has gone up or down, because every week they need to fill up their car." Falling gas prices won't necessarily bring down prices of other goods and services, at least not unless they stay low for an extended period of time, she cautions.

And the low gas prices reflect other global economic headwinds, including COVID-19 outbreaks in China, a looming "serious recession in Europe, and further economic slowdown in the U.S. as people struggle with high interest rates and worry about their personal wealth and savings," Ben Cahill, an energy security analyst at the Center for Strategic and International Studies, tells the Post. "Add it all up and it creates a bleak picture for oil demand. Prices are reflecting that."

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At the same time, inflation is easing in the U.S. and Europe, and Federal Reserve Chair Jerome Powell signaled Wednesday that the Fed could raise its benchmark interest rate by 50 basis points this month, not the 75-point raises from past months, sending U.S. stocks soaring.

The Dow Jones Industrial Average rose 737 points, or 2.2. percent, on Wednesday. That marks a increase of more than 20 percent from Sept. 30, pushing the Dow into a bull market — and capping the index's "largest two-month percentage gain since July 1938," The Wall Street Journal reports. The S&P 500 and Nasdaq rose 3.1 percent and 4.4 percent, respectively, on Wednesday, but they are still in bear market territory.

And the holiday gift of cheap gas may be temporary, given geopolitics and an upcoming OPEC-plus meeting. "This is a pretty delicately held-together price decline," GasBuddy's Patrick De Haan tells the Post. "The OPEC meeting could be the skunk at the picnic," AAA spokesman Andrew Gross agreed. "Trying to guess what they are going to do is tricky."