Gasoline prices are now below $2 in some parts of the country. Many experts believe that gas prices will continue to decrease, primarily because of falling oil prices. Could gas prices drop to $1 for the average price of gallon of regular, at last in a very few parts of America? The answer is improbably “yes”, in at least one or two locations. As a reminder, gas prices were below $1 in 1998.
In May 2008, when oil spiked above $147, gas prices rose to $4 in several places around the country. Anxiety about the need for the United States to import more crude was nearly universal, and there was much discussion about whether the president might have to open the Strategic Petroleum Reserve, which holds as much as 727 million barrels of oil.
What a difference six years has made. Oil recently fell below $64 a barrel. The trend in oil prices over the past several months has been relentlessly down. A few experts believe the price will go much, much lower, and this has been reported by several news outlets. For example:
“There is a possibility that if this price war becomes unmanageable, [we could] see prices down to about $40 a barrel [for WTI],” Jonathan Barratt, chief investment officer of Ayers Alliance Securities, told CNBC.
Certainly, there is a school of thought among many experts that oil could drop below $60. Several news outlets have reported some members of the government of Saudi Arabia think oil prices could fall that low.
So, what would trigger a $1 gas price somewhere in American? The average price for a gallon of gas was $3.26 a year ago. It is currently $2.69. However, in Lubbock, the average is $2.33. Some gas stations there have already cut prices to $1.99.
One part of the formula for low gas prices is proximity to huge oil refineries. This keeps the cost of transportation down. Texas and Oklahoma are close to big refineries and gas prices have dropped below $2.45 there.
Another part of the formula for low gas prices is state gas taxes. In some states close to refineries, those taxes are remarkably low. Oklahoma is 46th as rated by gas tax at $0.17 per gallon. To give that some context, New York’s tax per gallon (the highest in the country) is $0.50.
Oil at $40. A single gas station near huge refineries? Gas won’t go to $1 nationwide. That does not mean it could not get that low in a few places. Who would have imagined this six years ago?