Ten States Where Gas Prices Are Plunging
March gasoline prices fell for the first time in 10 years. As of April 1, the price of gas had fallen in 29 of the previous 33 days. Nationally, gas costs 30 cents a gallon less than it did a year ago and 15 cents a gallon less than it did following the February run-up in prices. AAA predicts the average price of gas in 2013 will be lower than 2012’s average of $3.60 a gallon — the highest AAA has ever recorded.
There are some significant reasons for the price drop. First, Americans are driving less — about 2.7% less, according to Department of Transportation figures, or nearly 90 billion miles since reaching a peak of more than 3 trillion miles in November 2007. Second, older, less-fuel efficient cars are being replaced by new ones that get better gas mileage. Third, refineries are finishing up their spring maintenance and turnarounds a bit earlier this year, so production is ramping back up sooner.
However, the main reason that gas is cheaper now than it was a month ago is that crude oil prices have dropped. Several of the states on this list had the highest gas prices a year ago: Illinois (fourth most expensive), Washington (fifth), Oregon (sixth), Indiana (ninth) and Michigan (10th). As of Monday, only two are among the 10 most expensive: Illinois, at sixth, and Washington at eighth.
According to Michael Green from AAA:
This year we have also seen an increase in North American crude, whether it’s out of the Bakken or Eagle Ford, or out of Canada, and that’s certainly helped with oil prices in the United States. It’s affected West Texas Intermediate (WTI), but it’s also affected some of the other blends, such as Western Canadian Select (WCS), and there’s a Bakken blend price. So refineries are buying oil from different places, and that certainly helps lower their costs, having these lower prices.
Illinois is a major hub for Canadian crude oil, and the state’s refineries have access to crude that is currently $15 a barrel cheaper than WTI and nearly $30 a barrel cheaper than Brent. Washington receives the cheaper crude by rail. As AAA’s Green noted, “Whenever oil is less expensive, that certainly helps the cost of gasoline. If it costs refineries less to make it, they’re gonna sell it to you for less.”
The cheaper crude making its way to the Midwest and the Gulf States is traveling by pipelines where possible and by rail and truck where there are no pipelines. Railroads hauled 233,800 carloads of crude in 2012, up from 65,800 in 2011 and just 29,600 in 2010. The availability of lower priced crude to refineries in Washington, Indiana, Michigan and Virginia is directly attributable to rail transport.
It is very possible — some might even say very likely — that the highest pump prices for gasoline are behind us for this year. Most analysts do not see prices rising to February levels again this year, barring some shock to the system, such as major political turmoil in big oil producing regions like the Middle East or Africa, major shutdowns due to bad weather or some major accident. That is the good news. The better news is, there really is no bad news.
To identify the 10 states where gas prices are plunging, 24/7 Wall St. considered data for April 1, 2013, and April 1, 2012,from AAA’s Daily Fuel Gauge Report. Refinery capacity figures came from the U.S. Energy Information Administration (EIA) and are as of January 2012. We also considered figures from the EIA on daily crude oil production, which are current as of January 2013. Figures on 2011 median income came from the U.S. Census Bureau, while fourth quarter 2012 cost-of-living comparisons are based on data from the Missouri Economic Research and Information Center (MERIC). We also reviewed tax figures from the American Petroleum Institute. The effective tax rate given here is current as of January 2013, and combines each state’s excise tax and other state taxes and fees. The 18.4 cent per gallon federal surcharge was not included.
These are 10 states where gasoline prices are plunging.