It is hard to imagine any positive aspect of the coronavirus which is taking lives, roughing up markets, and pushing parts of the world toward recession. However, the drop in oil prices will steepen as the virus spreads. As demand plummets this will likely pull down gas prices considerably.
Crude oil prices have dropped from $53 two weeks ago to $44. Some analysts expect the price to drop below $40 and others believe that the fall off could take the price of crude well below that. This has been triggered by several factors. One is that demand in hard-hit China and Japan has cratered. The demand drop could move to other countries. Supply, on the other hand, has stayed steady, for now.
The average price for a gallon of gas nationwide is $2.44 according to the AAA. That is about the same as last year. Abundant supply was expected to keep prices at current levels, but that was before the quick global spread of the coronavirus began to drive demand down.
The low price of gas over the last 15 years was $2.14 in 2016. The economy, ironically, was booming. However, supply was plentiful. In a number of states, the price breached $2 on the downside.
The IEA reports that there should be no drop in oil supply this year. This is despite effort on the part of OPEC to drop inventory. Other supply which includes that from the U.S. will prevent a fall off.
In some parts of the U.S. driving could drop quickly. There is already precedent for geographic isolation of populations, most recently in Italy. In the U.S. traffic to places like malls and airports has fallen. Some communities have already said they may close schools if there is a local threat.
A look at Gas Buddy’s prices by state for an average gallon of regular shows that in Texas, Mississippi, Louisiana, and Oklahoma the price has already dipped below $2.10. If the coronavirus begin to spread east from California, it is a lock that other states will have gas prices even below that.
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