Trump Claims Gas Is Below $1.99 In Places—Here's Where Gas Prices Are Actually Lowest Amid Affordability Crisis

The national average for a gallon of regular gasoline has fallen to about $3.06 — the lowest level since 2020 — driven by stronger domestic crude supply and higher gasoline production (9.8 million b/d for the week ending Nov. 28, up >2% year-over-year). West Texas Intermediate averaged $58.58 that week (down $9.68 YoY), while state-level pump prices range from roughly $2.18–$2.95 in the cheapest states to $3.46–$4+ in the priciest. The supply-led decline eases inflationary pressures and consumer affordability strains, while also intersecting with political debate as President Trump’s claims of $1.99 gas in some states contrast with national averages ahead of his campaign events.

Analysis

Market structure: Falling pump prices (US avg ~$3.06, WTI ~$58.6) favor consumers, transportation-intensive sectors (airlines, trucking) and discretionary retail while pressuring US upstream E&P and refiners whose crack spreads can compress if gasoline falls faster than crude. National heterogeneity (TX ~$2.18–2.95 vs CA/HI >$3.5–4) means regional winners: inland truckers and Midwestern retailers outperform coastal exporters. Increased domestic crude production and higher refinery throughput (gasoline production ~9.8 mb/d) point to supply-side relief rather than demand-driven weakness, implying a supply-dominant short-term balance.

Risk profile: Tail risks include OPEC+ coordinated cuts, Middle East disruption, or weather-related refinery outages that could send WTI >$70 and gasoline >$3.50 within weeks; conversely, stronger-for-longer US production keeps a ceiling near $60–65 absent shocks. Immediate horizon (days–weeks) is driven by weekly EIA prints and rig counts; 1–3 month window depends on winter heating demand and export flows; 6–12+ months hinges on capex cycles in shale and global demand recovery. Hidden dependencies: refinery maintenance seasonality, RINs cost, and crude export logistics can flip margins quickly.

Trade implications: Favor overweight in airlines/travel (JETS ETF or DAL, LUV) and consumer staples/retailers (WMT) for 3–6 month rallies, underweight pure E&P (XOP, ticker-specific APA/OVV) and refiners (VLO,MPC) for potential margin squeeze. Use options: buy 3–6 month calls on JETS/DAL to express fuel-cost tailwind, and implement 2–3 month put spreads on VLO to limit downside while funding premium. Cross-asset: expect downward pressure on TIPS breakevens and modest easing in 10y yields if disinflation persists; long-duration equities benefit.

Contrarian view: The market underestimates the ease with which refiners can export surpluses and rebuild crack spreads if global gasoline tightness appears—short refiners needs hedging. Also a cold snap or OPEC cut could reprice energy rapidly, so maintain convexity: small directional positions with explicit stop-losses and a 6–12 month long-dated XLE/WTI tail call as insurance. Historical parallels (post-2020 volatility) show rapid reversals; position sizes should assume a 15–30% swing in energy prices.

Key Decisions for Investors

• Establish a 2–3% long position in JETS ETF (or 1% each in DAL, LUV) using 3–6 month call options (delta ~0.30) to capture lower fuel costs; target hold 3–6 months, take profits if US avg gas >$3.50 or WTI >$70.
• Trim energy E&P exposure: reduce XOP (E&P ETF) weight by ~30% immediately and redeploy into WMT (2% position) and regional trucking names (e.g., JBHT 1%) to capture freight margin relief over 1–3 months.
• Open a 1–2% notional short refiners position: buy a 2–3 month VLO put spread (sell 1 strike, buy lower strike) sized to target 15–25% downside in case crack spreads compress; unwind if WTI >$70 or gasoline >$3.50.
• Buy a 6–12 month out-of-the-money XLE call (or long-dated WTI call) as a 0.5–1% portfolio tail hedge to protect against geopolitical upside in oil that would hurt consumer plays; exercise threshold WTI >$80.
• Monitor catalysts: act on EIA weekly inventory reports, Baker Hughes rig count, and next OPEC+ meeting—if US crude inventories draw >5 mb week-over-week or OPEC signals cuts, reduce consumer/travel longs within 48–72 hours.