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Average U.S. price of gas per gallon falls below $2
As Wisconsin and U.S. residents faced travel restrictions unparalleled in their lifetimes, gas demand has continued to fall, taking with it gas prices around the nation.
The nosedive leveled off earlier in the week, after a more precipitous drop at the beginning of the pandemic crisis several weeks ago, but a steady tick downward has continued like a dripping faucet nonetheless. As of Wednesday morning, per gallon prices had fallen to as low as $1.69 in the Lakeland area, with the state average at $1.52.
Nationally, the average price of a gallon of gas fell below $2 for the first time in four years, clocking in Wednesday morning at $1.99 per gallon. The most common gas price in the U.S. is $1.79 per gallon, according to GasBuddy analyst Patrick DeHaan, followed by $1.99 and $1.69.
To be sure, there were some dramatically lower prices. In Wautoma, one station was selling gas at 95 cents per gallon, with several others close behind at 97 cents. In Delavan, prices Wednesday morning were consistently below $1.10. In Milwaukee, gas prices were higher, running generally in the range between $1.49 and $1.79, with some stations on either side of those margins.
Generally speaking, analysts expect the slide in prices to continue. AAA projected that the price could fall to $1.75 nationally in April. GasBuddy went even further, predicting that the national average could drop to $1.49 by mid-April, which would be the lowest since 2004, with hundreds of stations going to 99 cents per gallon for the first time since the early 2000s.
“This is an unprecedented event,” DeHaan said. “We’re experiencing one of the biggest historical collapses in gas prices, including the Great Recession of 2008. World demand for oil has plummeted virtually overnight while domestic demand for gasoline continues to fall off a cliff with more states implementing shelter-in-place orders.”
DeHaan said oil prices were so low you could buy 23 barrels of Western Canadian Select crude oil for the same price as a drum to put it in. He also said gas prices will continue to fall in the days ahead with no end in sight.
“Motorists need not be in any hurry to fill up, and those who do should be shopping around as prices will continue to race lower,” he said. “While some lucky Americans may be able to fill for 99 cents per gallon.”
Not only is no rebound in demand expected by analysts, given that, with closed schools and shuttered businesses and limits on nonessential travel, there’s nowhere for American motorists to go, but an oil price war between Russia and Saudi Arabia continues to take its own toll on crude oil prices as the market becomes glutted with oil.
In what Rystad Energy calls the creation of “one of the biggest oil supply gluts the world has ever seen,” WorldOil magazine reports that Saudi Arabia is already making good on its promise to flood the world market with increased oil in April, unleashing what the magazine calls a first wave of crude toward Europe and the U.S. as Saudi Arabia increases production to 12.3 million barrels a day, an increase of about 2.6 million barrels a day.
Accordingly, oil prices for U.S. and global crude have suffered the largest quarterly percentage declines on record and lost more than half their value for the month, MarketWatch reports. Brent crude, the international benchmark, closed Tuesday at $22.76 a barrel, the lowest since November 2002, while West Texas crude traded at $20.40 a barrel, down 66 percent for the year.
There was some hope Tuesday that oil prices might be stabilized, as President Donald Trump said Saudi Arabia and Russia would meet to discuss ways to stop the free fall of oil prices, with Trump saying he stood ready to help.
“They’re going to get together and we’re all going to get together and we’re going to see what we can do,” Trump said Tuesday. “The two countries are discussing it. And I am joining at the appropriate time, if need be.”
Oil price war irrelevant?
Some observers believe the oil price war is increasingly irrelevant as the coronavirus pandemic has become the dominant driver in falling demand.
“AAA expects gas prices to keep dropping as cheap crude combines with the realities of people staying home and less demand for gas,” said Jeanette Casselano, AAA spokesperson. “Today, motorists can find gas for $1.99 or less at 68 percent of gas stations in the country.”
Casselano said another factor keeping prices low is the availability of winter-blend gasoline. While demand is diminishing, she said, COVID-19 is not impacting the U.S. gasoline supply, and the U.S. has an unusual amount of winter-blend gasoline still available for this time of year.
She said that has in turn caused the Environmental Protection Agency (EPA) to extend the sale of winter-blend gas past the May 1 deadline to May 20, and Casselano says the agency could extend the waiver again.
“The EPA’s extension of the winter-blend gasoline waiver will contribute to sustained lower prices, especially as U.S. gasoline demand readings look more like winter-driving season than spring,” she said.
The bottom line is, Casselano said, AAA forecasts that until crude oil prices and gasoline demand increase, cheaper gas prices are here for the foreseeable future.
Those lower prices could be permanent, or at least the lower demand that’s driving those prices could be. For instance, in a research note, analysts at Goldman Sachs said demand from commuters and airlines may never return to their previous levels. They say that demand accounts for about 16 million barrels per day of global consumption.
Indeed, the Goldman Sachs analysts called the COVID-19 pandemic a game changer that had rendered the price war irrelevant and that would change the energy industry forever.
“With social distancing measures now impacting 92% of global GDP, the ultimate magnitude of these shut-ins which is still unknown will likely permanently alter the energy industry and its geopolitics, restrict demand as economic activity normalizes and shift the debate around climate change,” the research note stated. “Not only is this the largest economic shock of our lifetimes, but carbon-based industries like oil sit in the cross-hairs as they have historically served as the cornerstone of social interactions and globalization, the prevention of which are the main defense against the virus.”
There will likely be industry consolidation with companies being shedded: “When the industry emerges from this downturn, there will be fewer companies of higher asset quality, but the capital constraints will remain,” the research note stated.
That market consolidation could be disastrous for the U.S. economy, former energy secretary Rick Perry warned on Fox News this week.
“I’m telling you, we are on the verge of a massive collapse of an industry that we worked awfully hard over the course of the last three or four years to build up to the number one oil and gas producing country in the world, giving Americans some affordable energy resources,” Perry said. “It’s a driver of a massive amount of our American economy. There are some big companies out there, but there are independents out there that are the real buffer and if we were to lose that, if we woke up a year from now and there were five big companies because all these independents are going out of business and if there’s a company called Aramco and a company called Rosneft, ExxonMobil, Chevron, BP, if that’s it, then I would suggest that would make a lot of Americans really nervous.”
It’s not just oil that’s in trouble. Alternative energy industries are being heavily impacted, too.
SunPower CEO Tom Werner told Bloomberg this week that his company anticipates a potential 10% to 30% drop in U.S. residential solar demand during the second quarter because of the coronavirus pandemic. California and New York would lead the way in declining demand.
The pandemic is also threatening the wind industry. According to the American Wind Energy Association, the impact of Covid-19 on the industry will be significant — an estimated 25 gigawatts of wind projects are at risk, representing $35 billion in investment, with the potential loss of more than $8 billion to rural communities in the form of state and local tax payments and land-lease payments to private landowners, and the loss of more than 35,000 jobs, including wind turbine technicians, construction workers, and factory workers, the association stated last week.
Richard Moore is the author of the forthcoming “Storyfinding: From the Journey to the Story” and can be reached at richardmoorebooks.com.