Gas prices dip below $4 but inflation remains stubbornly high

Inflation-scarred consumers are finding a bit of relief these days at an unlikely place: the gas pump.

The average price of gasoline dipped below $4 a gallon Tuesday for the first time in three months, according to AAA. The price of regular gas has fallen by 38 cents in the last month to a national average of $3.98.

The overall cost of living, however, remains stubbornly high. Consumer prices in October were up 0.4% from the previous month, according to a report Tuesday from the Labor Department. That's a bigger monthly increase than forecasters had expected.

Rising housing costs accounted for about a third of the monthly increase. Grocery prices were also up sharply during the month.

Why gas prices are falling

The drop in gasoline prices in recent weeks is thanks to a combination of falling crude oil prices, refineries' switch to a cheaper blend of winter fuel, and the typical seasonal drop in demand for gas.

"Temperatures are getting colder," says Patrick De Haan, petroleum analyst for GasBuddy. "People who have boats and RVs are probably done for the year. I would say, by Thanksgiving, so long as we don't get any wild cards geopolitically, the national average could be $3.75 a gallon."

Gas prices are still at a record high for this time of year, however — about a dollar a gallon higher than when the U.S. went to war with Iran. Even with the recent drop in prices, this year's drive to grandma's for Thanksgiving could be the most expensive ever.

Diesel prices have also fallen, but more slowly than gas prices. AAA says the average price of diesel fuel is $6.15 a gallon, down about 13 cents from a month ago.

The high cost of diesel fuel is another byproduct of the war — not only the U.S. war with Iran but also Russia's war with Ukraine. Russia is ordinarily a big exporter of diesel fuel, but that supply has largely dried up because of damage to Russia's refineries.

"When a country like Russia isn't exporting diesel, that is very impactful for the global market. So diesel prices – they will come down but they will still remain very elevated," De Haan says.

Heating oil prices are also high

Rising diesel prices are also driving up the cost of heating oil in the northeast, because heating oil is a close cousin of diesel.

Mild fall weather has kept heating costs in check so far, but De Haan says a blast of cold air could push heating oil prices even higher.

Higher diesel prices also affect the cost of other goods that have to be moved by truck or train or cargo ship.

"You're starting to see higher freight costs get passed through," says economist Mike Reid of RBC Capital Markets. "We've seen it show up notably in goods that are heavily imported — apparel, recreation goods, IT equipment."

In a speech Tuesday before the inflation release, Federal Reserve Chris Waller suggested that energy shocks could have more lasting effects on inflation that previously though. Waller suggested the central bank may need to raise interest rates more aggressively to curb price hikes than markets had previously expected.

No annual comparison for inflation this time

While Tuesday's inflation report shows how much prices rose in the last month, it does not include the typical reading on how prices have changed over the last year. That's a casualty of last year's government shutdown, which idled hundreds of government price-checkers so prices from October 2025 were never recorded for comparison.

The Cleveland Federal Reserve Bank estimated before Tuesday's release that consumer prices in October were up 3.7% from a year ago. That would outstrip average wage gains of just 3.1% during the year, so the typical worker is losing buying power. That's a big reason for the heavy turnout in last week's mid-term elections. 49.1% of eligible voters took part in the election, the second highest total for any midterm in more than a century.

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