Tyler Jacobsma is the founder of Flowframe.xyz, which provides in-depth content and tools for prediction market traders.
The Kalshi “Gas Prices in the US This Month” contracts are pricing in a roughly 30% probability that the national average hits $3.00 by February 28. Based on our research, this feels too high.
The national average sits at $2.93 as of February 15. To settle YES on the $3.00 tier, AAA needs to report strictly greater than $3.00 on settlement day. That requires a 7.1-cent climb in 14 days, into the teeth of a global crude glut, collapsing geopolitical risk premiums, and seasonal demand at its annual low.
The NO contract on the $3.00 tier currently trades at 70 cents. If the national average stays below $3.00 on February 28, that contract pays out $1.00. That is a 43% return in two weeks.
The full analysis follows, but if you’re looking to position around this setup — or explore any of the other macro and event-driven markets Kalshi lists — make sure to use our Kalshi promo code before placing your first trade.
The Settlement Mechanic That Matters
These contracts settle on the AAA national average for regular unleaded, not the EIA weekly survey. That distinction matters more than most traders realize.
AAA pulls daily data from credit card sweeps across 130,000+ stations via OPIS. It is the arithmetic mean of all 50 states, updated daily. The EIA survey, by contrast, is a weekly sample subject to retroactive corrections and some lag.
The contract language specifies “strictly greater than.” If the average lands at exactly $3.000, the contract resolves NO.
Here is where the Kalshi market stands right now:
Where Will Gas Prices Land This Month?
Why $3.00 is a Stretch
The Crude Oil Glut
Crude oil accounts for roughly 45–50% of what you pay at the pump. It is the single largest input cost. And the global crude market is drowning in supply.
The IEA February Oil Market Report documents a severe mismatch: global output is projected to surge by 2.4 million barrels per day in 2026, while demand grows by only 850,000. Global observed inventories rose 477 million barrels through 2025. Floating storage has swelled by 248 million barrels, with sanctioned Russian and Iranian crude finding its way into gray-market channels.
WTI trades in the mid-$64 range, Brent struggles above $67, and the EIA projects Brent averaging $58 for all of 2026. When the primary raw material is this cheap — and likely getting cheaper — retail gasoline doesn't stage a 7-cent rally in two weeks.
The Geopolitical Premium is Gone
Early February saw crude spike on US-Iran tensions in the Strait of Hormuz, temporarily pushing Brent toward $70. That risk appears to be evaporating.
Diplomatic backchannels have reopened through intermediaries in Amman and Oman. The administration has publicly signaled a willingness to extend negotiation timelines by weeks. OPEC+ members are reportedly pushing to resume production increases as early as April.
The market has pivoted from pricing a supply disruption to pricing the 4-million bpd surplus anticipated by year-end. That repricing is bearish for crude, and therefore bearish for retail gasoline
Late February Historically Deflates
The “spring rally” narrative is something YES buyers may be pointing to, but the historic data doesn't back up that narrative.
Three consecutive years of late-February mean reversion. The RVP summer-blend transition is a real bullish catalyst, but its retail passthrough typically lags wholesale by weeks. In late February, retailers are clearing cheaper winter-blend inventory, not marking up to summer prices. That pump-price impact arrives in late March and April.
Presidents’ Day weekend confirms the pattern. Despite the holiday driving bump, the national average fell 1.4 cents from February 12 to February 14. If a major travel weekend cannot generate upward momentum, the subsequent two weeks of historically light seasonal demand likely won’t either.
The Weather
Winter weather has already had its impact on gasoline demand this month. Earlier in February, relatively minor storm systems dropped national gasoline demand from 8.75 million barrels per day to 8.15 million almost overnight, according to the EIA. A potential storm system is being monitored for around Feb 18–20, tracking from the Rockies to the Northeast, though late February is trending milder than earlier in the season as the polar vortex pattern weakens.
Winter storms affect gasoline markets through two opposing channels.
- Demand destruction is typically the dominant force. When highways ice over and travel advisories go up, vehicle miles traveled collapse. Fewer cars on the road means fewer gallons sold, which means stations lower prices to move inventory. The early-February demand drop illustrates how quickly this dynamic takes hold.
- Supply disruptionis the secondary force. Severe weather also hits refinery operations, pipeline logistics, and terminal distribution. Ice on loading racks, power outages at pumping stations, and frozen pipeline segments can create localized supply crunches that spike regional wholesale prices. The Midwest and Gulf Coast are particularly exposed.
- The net effect, when storms do hit, tilts bearish. Supply disruptions tend to be localized to specific facilities and regions. Demand destruction is geographically broad. At the national average level, where 50 states are blended, widespread demand collapse usually outweighs regional supply bottlenecks. But the late-February weather outlook is not severe enough to be a primary driver of this trade. It is a minor supporting factor at best.
California
California is the one genuinely bullish variable. Permanent closures of Phillips 66 Wilmington and Valero Benicia are removing roughly 17% of in-state refining capacity. The California average has hit $4.575, with San Francisco approaching $4.79.
But the national arithmetic limits California’s impact. The state represents approximately 11% of national gasoline consumption. Even a massive 20-cent California surge contributes only about 2.2 cents to the national average.
Meanwhile, the rest of the country anchors prices down. Texas averages $2.53. Mississippi: $2.49. Georgia: $2.73. Thirty-nine states outside the West Coast provide a deflationary floor that California cannot overcome in the national aggregate. The same applies to the Valero Ardmore refinery fire in Oklahoma — locally disruptive, but nationally insufficient.
The February 9 Data Question
One data point deserves mention. Intra-month tracking shows a $3.033 reading on February 9, flagged alongside a conflicting $2.902 figure from another source. If the official AAA daily feed actually printed above $3.00 on any day this month, the $3.00 threshold is not as distant as the current $2.930 baseline suggests.
I could not conclusively resolve which figure the settlement oracle published. If you are sizing this trade, treat this ambiguity as a reason to avoid oversizing — not as a reason to avoid the trade entirely.
The Trade
Buy NO on “Above $3.00” at 70 cents.
You pay 70 cents per contract. If the national average is at or below $3.00 on February 28, you collect $1.00. That is a 30-cent profit per contract, or a 43% return in 14 days.
The fundamental case: the national average needs to rally 7.1 cents from $2.93 with no crude support, no demand catalyst, a seasonal pattern that has deflated in three consecutive years, and seasonal demand at its annual trough. The market prices a 30% chance of this happening. The physical market suggests it is closer to 12-18%.
Hedge: Buy YES on “US strikes Iran by Feb. 28” at 13 cents.
This is not a directional bet on Iran. It is cheap insurance against the one scenario that breaks the gas trade.
A US strike on Iran would spike Brent toward $80-90 per barrel overnight. The crude-to-pump transmission would likely push the national average through $3.00 within days, killing your gas NO position. At 13 cents, you are getting a 7.7-to-1 payout on the exact tail event that matters.
Size the hedge at roughly 10-15% of your gas NO position. On a $500 gas trade, that is $50-75 in Iran YES contracts. If nothing happens with Iran, you lose the hedge, but collect on the gas. If a strike happens, the hedge pays out enough to roughly break even.
One timing caveat: the hedge protects best against strikes in the first 10 days of the window (Feb 14-24), when crude has time to transmit to retail. A strike on Feb. 27 might not move the AAA average before settlement. However, geopolitical events move crude within hours, and pump prices within 3-7 days, so most of the window is covered.
Example: $500 Position With Hedge
You buy 714 NO contracts at 70 cents each, which equals $500. You buy 577 YES contracts on Iran at 13 cents each, which equals $75. Total deployed: $575.
The hedge converts the worst-case Iran scenario from a total wipeout into an approximate breakeven, while the best case still delivers a 24% return in two weeks.
Why This Trade Works
The Kalshi gas price market is offering 43% returns in two weeks on an outcome supported by crude fundamentals, seasonal patterns, and macro deflation. The YES side of this market is built on a spring rally narrative that hasn't materialized in any of the past three Februarys.
Buy the $3.00 NO at 70 cents. Hedge the Iran tail with a small YES position at 13 cents. And size it as a high-conviction trade with defined risk — not as an all-in bet.
What is Kalshi
Different than a traditional sportsbook and available in most states, Kalshi allows users to make predictions across several unique markets, including sports, entertainment, elections, and even weather.
Kalshi operates on a contract-based system where users buy "contracts" (priced between 1–99 cents) based on whether they believe a specific event will happen. The price of each contract fluctuates in real time based on market sentiment, and like the stock market, traders can sell positions early to lock in profits (or minimize losses).
