How Far Will The Price For A Gallon Of Gas Fall
Spread the love
  •  
  •  
  •  
  •  

As oil prices continue to drop to levels we have not seen since 1970, gas prices are following, but how far will they drop?

Crude Oil held steady near $20 a barrel on Wednesday, after President Trump’s pledge to meet with feuding producers Saudi Arabia and Russia (whose real feud is with US Shale producers) to support the market failed to bolster prices after their worst ever quarter.

Having crashed by a record 66% in the first three months of the year, as the coronavirus destroyed demand and the world’s biggest producers embarked on a catastrophic supply free-for-all, oil prices extended losses on Wednesday even after Trump said he discussed the collapse with his Russian and Saudi counterparts, adding that Moscow and the kingdom would “get together” to seek a solution.

The national average for a gallon of gas has fallen 35 cents in a month and the first gas station to drop prices to 99 cents per gallon is a BP station in London, Ky. reported to GasBuddy the morning of March 19.

crude-oil-price-history-chart-2020-04-01-macrotrends

Crude Oil Prices – 70 Year Historical Chart

So the question is: How far will the price for a gallon of gas fall?

Today’s gas prices are a far cry from the $4.11 Americans were paying in September of 2008.

Even AAA’s national gas price chart seems high as prices continue to tumble almost daily.

Current Avg. $1.984 $2.374 $2.635 $2.596 $1.794
Yesterday Avg. $1.997 $2.388 $2.648 $2.600 $1.807
Week Ago Avg. $2.089 $2.476 $2.738 $2.650 $1.853
Month Ago Avg. $2.441 $2.782 $3.045 $2.853 $2.162
Year Ago Avg. $2.692 $2.987 $3.240 $3.028 $2.361

 

The irony of gas prices falling off a cliff which has led to some areas of the country spending less than $1 for a gallon of gas is, the fact that most Americans aren’t supposed to go anywhere due to many states implementing a coronavirus lockdown.

The COVID-19 crisis means that most families aren’t receiving the big boost to their budget you would normally expect with such low gas prices, as the activity of ordinary life has ground nearly to a halt.

Gallon of Crude oil Prices (Orange) vs Gallon of Gas Prices (Blue)

crude-oil-vs-gasoline-prices-chart-2020-04-01-macrotrends

Prices will most likely continue to fall but unlike the 1970s where American’s paid around 55 cents for a gallon of gas. 

It’s highly unlikely we will see those prices make a return, even if Crude Oil continues to tumble.

No, it’s not due to collusion by the oil companies, the reason is far less nefarious, it’s simply supply and demand.

Over the last almost 30 years (since 1976) there have been no new refineries built in the US due to tighter environmental restrictions combined with low prices has made the oil business less profitable.

Less profitability meant that gas companies had little interest in expanding it’s crude oil refineries capacity. 

According to BP U.S. refinery capacity in 1980 was 17.8 million barrels per calendar day and 40-years later in 2019 the U.S. reached a record-high of 18.8 BPD.

As you can see over the past 4-decades America has done little to expand its capacity to refine crude oil into usable gasoline.

So American’s can expect to pay around 99 cents a gallon unless something dramatic happens.

Paying less than $1 for a gallon of gas would be wonderful news heading into the summer months when American’s typically hit the road.

Of course, we will only get to take advantage of this economic windfall if and when these Coronavirus lock-downs ever end.


Spread the love
  •  
  •  
  •  
  •