Why gas prices may go below $2 per gallon

Good news for summer road trippers: Gas prices are falling and in some states, gas will be less than $2 per gallon by fall.

According to the American Automobile Association, gas prices fell for 27 days in a row. On Wednesday, the national average for a gallon of regular is $2.59, roughly $0.90 less than the average at this time last year.

Thanks to rising supply, falling demand, and a switch to cheaper winter gasoline, Gas Buddy predicts prices will drop 10 to 15 cents by Labor Day.

And Tom Kloza, chief oil analyst for the Oil Price Information Service, told CNN, "If you have these crude oil prices in the autumn, you'd be looking at prices 60 to 70 cents lower than today."

"There will be thousands, even tens of thousands of stations below $2 by the time we're into football season."

Here's 5 reasons why gas prices are falling:

Oil Prices at Record Lows

Thanks to an American energy revolution that is boosting domestic supplies and a tepid global economy that is depressing demand, oil prices are at record lows.

Oil prices determine gas prices, and oil plunged nearly 20 percent in July to about $43 per barrel, a six-year low.

According to CNN Money, the price of oil has plunged to the lowest levels since the 2009 economic crisis.

Rising Supply

US oil production has risen dramatically in recent years, up 90 percent since 2008. That's thanks to new technologies allowing oil companies to extract oil from shale rock.

Even as the US produces more oil domestically, foreign oil supplies are steadily pumping. OPEC, the cartel of oil producing nations, is keeping production levels stable. 

The result, explained AAA, may be a glut of oil.

“Expectations that the global oil market will remain oversupplied in the near term are keeping downward pressure on the price of crude,” AAA said Monday.

Falling Demand

Even as oil supplies expand, analysts predict demand will fall.

Economic troubles in Europe and China have dried up global demand for oil. At home, years of recession and energy- and cost-saving have trained Americans to consume less, also. Which is why, according to some predictions, oil consumption will grow by less than 1 percent this year.  

Of course rising supply, combined with falling demand, results in lower prices for consumers.

Seasonal changes

Gas prices typically drop 35 to 65 cents in the autumn, after the busy summer driving season. Last year, average prices fell by more than a dollar between August and Christmas, according to Patrick Dehaan, a senior petroleum analyst at Gas Buddy.

That's partly because gas stations are required to sell a more expensive summer blend of gasoline through Sept. 15 due to EPA rules requiring lower-volatility gasoline that produces less ground-level ozone in the summer. The special summer blend costs refiners about 25 cents a gallon more to make, a cost that is passed on to consumers at the pump.

Nuclear deal with Iran

Finally, should it pass Congress, President Obama's tentative nuclear deal with Iran would lift sanctions and reopen limited trade with that country, potentially bringing more Iranian oil to the US.

If Iran is able to sell oil freely, it can immediately unload about 20 million barrels it has in storage, according to analysts. It can also begin producing about 400,000 barrels a day from existing oil fields, and could produce as many as 500,000 barrels a day within a year.