National average for a gallon of gas dips below $3

Inflation is gradually moderating, and for some consumer goods, prices are outright declining. That’s the case for gasoline, which is down 7.5% since last January, or around 20 cents a gallon on average nationwide, according to AAA.

But prices are still rising on most consumer goods more than the Fed wants.

By contrast, “gasoline prices have been deflating,” said Nationwide economist Kathy Bostjancic. “Regular now is below $3 a gallon.”

The reason is basic economics, per Gernot Wagner, an economist at Columbia Business School: “Supply up, demand down, prices go down.”

OPEC is boosting oil production, while the U.S. plans to flood the world market with Venezuelan crude. Meanwhile, as electric vehicle adoption spreads globally, it throttles gasoline demand. All of that translates to lower gas prices for U.S. consumers.

“I think the impact is very much mental for most people,” said Stephen Kates at Bankrate. “Talking to my father, he said, ‘Wow, gas prices are so low now. This is great.’”

That positive sentiment might not boost overall consumer confidence or spending much, however, according to Johnny Sawyer, a senior research manager at polling firm Ipsos.

“Even though gas prices are down year over year, other prices are up — housing, groceries,” he said.

Electricity and natural gas are also up 6% and nearly 10%, respectively, since last year. So while it’s cheaper to drive to and from work these days, it’s more expensive to heat and light your house once you get there.