In June, when oil reached above $100 a barrel, gasoline prices set a record high of just above $5 for a gallon of regular nationwide. Economists were worried that the prices would take up a large part of the household spending of lower- and middle-income Americans and could undermine the entire economy. Gas prices have fallen sharply since then, and the price of gas has dropped below $3 a gallon in several states, including Arkansas, Georgia, Louisiana, Mississippi and Oklahoma.
Oil prices have dropped to $80 recently. A global economic slowdown has undercut demand for crude. The world’s largest importer, China, has posted poor gross domestic product figures. To some extent, that is because of the effects of COVID-19, which have shut down major cities and manufacturing operations. U.S. oil companies have cranked up production as much as they can. However, it takes time to refit refineries to produce gas used in cars.
One advantage the states with gas prices below $3 have is that most are close to the Gulf of Mexico and the huge refineries south of Houston. These are among the largest refineries in the world. Transportation is a major contributor to the cost of gas. Mississippi and Louisiana are on the Gulf Coast. Oklahoma and Arkansas are adjacent to either Texas or Mississippi.
Finally, the effect of state gas taxes is a major component of the cost per gallon. According to the API, the average gas tax nationwide is $0.5709. Mississippi ($0.3719), Oklahoma ($0.3840) and Louisiana ($0.3841) have among the lowest gas taxes in the country
If the gas price continues to drop, several other states could have prices below $3 by the end of the year. These include Missouri, South Carolina and Tennessee.
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