Gasoline prices are on track to hit their lowest level since 2021 heading into the July Fourth holiday.

On Tuesday, the national average price for a gallon of regular gasoline stood at $3.18 per gallon, according to AAA data. This marks a $0.31 drop compared to the same day last year.

Cheaper gas is a welcome relief for the more than 61 million people expected to hit the road this weekend. "Americans will spend ~$500 million less on gasoline this July 4 weekend (Thu-Sun) vs last year," GasBuddy head of petroleum analysis Patrick De Haan wrote on X.

The drop in gas prices has been largely driven by lower prices for oil (CL=F, BZ=F) following President Trump's announcement of a ceasefire between Israel and Iran. That eased concerns about a potential supply shock.

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Despite relief at the pump, the next one or two months may be bumpy, according to Turner, Mason & Co. chief market analyst Tom Kloza. "We may wobble a bit higher or lower in July and August," he said. "Demand is decent and there are enough issues with US refining to keep the market supported in these peak summer months."

Kloza noted a wide disparity in prices across the country. Drivers in the Southeast and Great Lakes regions may find gas for under $2.50 per gallon, while California continues to post the highest prices nationwide.

The Golden State's elevated prices are due to a combination of special fuel blend requirements, higher taxes and fees aimed at curbing emissions, and an expected shutdown of two major refineries, which could send prices even higher.

Still, at $4.58 per gallon, prices in California have eased about $0.21 compared to this time last year.

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Energy analysts see prices falling below $3 per gallon later this year as the driving season winds down and refineries switch to less expensive winter blends.

However, weather remains a wild card — as does the Middle East. Hurricane season is just beginning, and any major storms in the Gulf of Mexico could send prices climbing again.

"As long as tensions in the Middle East remain contained and the U.S. avoids a major hurricane, we could see the national average fall below $3 per gallon later this summer," GasBuddy's De Haan said.

Ines Ferre is a Senior Business Reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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