The sell-off in crude and plunging demand as people move indoors has driven gasoline prices down to $2.08 for the average gallon of regular nationwide. It continues to plunge daily. In 15 states, the number is under $1.90. The price is bound to rise quickly.
The drop is 12 cents per gallon in the last week. Patrick DeHaan, head of petroleum analysis for GasBuddy, remarked, “Gas prices have spent virtually all of March marching lower, with the drop continuing as the coronavirus destroys oil demand globally, leading to the lowest oil prices we’ve seen in 18 years, paving the way for still an additional 35-75 cent per gallon drop at most stations in the weeks ahead.”
Among the states with the lowest gas prices are Oklahoma at $1.67; Ohio at $1.79; Wisconsin and Mississippi at $1.81; Texas, Kentucky and Indiana $1.82; South Carolina and Michigan at $1.84; Arkansas, Louisiana and Kansas at $1.88; and Missouri, Alabama and Tennessee at $1.89.
The spread of low gas prices almost always has been in the southern states near the large refineries south of Houston. Transportation cost from there to the north, east and west are relatively expensive. It is unprecedented to have prices as far north as Michigan at levels similar to Gulf states.
The price war between Russia and Saudi Arabia continues to put the globe awash in oil. Shale drillers in the United States continue to pump despite the fact that they lose money on every barrel. There is a good chance that many of these companies will be shuttered, taking some supply offline.
Oil prices have cratered to under $20 a barrel recently, down from over $53 just six weeks ago.
It is hard to overestimate the effect that a closed-down economy over most of the world will have on demand. Gross dometic product has been forecast to drop as much as 15% in the United States in the second quarter. Nations in Europe and Japan could suffer similar fates. This would drive a drop in demand that would be unprecedented since the 1930s.
Speculation has begun that crude could drop as low as $5 a barrel. That would bring gas prices to a level well under $1. Crude has not been that low since the early 1970s, before the Arab oil embargo.
As many economists have pointed out, extremely low gas prices usually help the economy. However, that is only true if people can drive or fly.
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