Gas at $1 a Possibility for Parts of U.S.
Declining crude, fuel glut and seasonal refining shifts among factors that could bring down pump prices
Pump prices, already some of the lowest in years, could hit $1 a gallon or less in parts of the country in coming days and weeks. Here, a Shell station in Woodbridge, Va., last month. PHOTO: SAUL LOEB/AGENCE FRANCE-PRESSE/GETTY IMAGES
Will Americans ever see $1-a-gallon gasoline again? In some parts of the U.S., the answer could soon be yes.
The price of crude oil—the main expense in generating fuels like gasoline —has plunged from more than $107 a barrel in June 2014 to around $30, helping pull down prices at the pump. In several places around the U.S. gasoline now retails for just over $1.
Crude prices continued to languish Monday, falling $1.75, or 5.9%, to $27.94 in New York. If oil prices continue to march lower, gas stations across a wide swath of the country could soon peddle fill-ups at prices not seen since the 1990s.
“There is a huge excess of gasoline supply in the Midwest,” saidPatrick DeHaan, senior petroleum analyst at GasBuddy. Refiners there can access Canadian crude that’s even cheaper than the U.S. benchmark and have turned an oil glut into a fuel glut.
“That could trigger fire sales—very quick and low price sales,” he said, adding that in the Great Lakes region, where gas stations are fiercely competitive, ultralow gas prices could appear as refiners are forced to clear out supplies of winter grade fuel. GasBuddy said Tuesday that there’s a “strong possibility” gasoline prices in the region could dip to 99 cents a gallon.
Where $1 gasoline does make an appearance, experts say it might prove fleeting. Refiners often shut down their plants in the spring, the season between making gasoline to burn in the winter and summer-grade fuel, a more expensive gasoline to produce because it requires extra ingredients to comply with hot-weather emissions standards.
The cheapest gas in the U.S. is selling in Oklahoma City at a 7-Eleven station for just $1.11, according to data from GasBuddy.
The national average price for the fuel is considerably higher at $1.73 a gallon, according to motor club AAA. That is because more expensive gasoline sales on the West Coast in places like California and Oregon are inflating the U.S. average. Protracted refinery shutdowns in the region have created some supply shortfalls and extra pollution-control fees mandated at the state level push up gasoline costs in the area.
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But in parts of the U.S. that are close to refining hubs, have low state taxes on fuel or easier environmental standards, gasoline retails for quite a bit less. Some stations in Missouri now sell regular for as little as $1.22.
Nationwide, drivers are filling up for a full $1 a gallon less than they did at the peak price in 2015 and 25% of U.S. stations are already pricing gasoline under $1.50, according to AAA.
This year marks the first time since March 2009, in the wake of the global economic meltdown, that the U.S. gasoline average has dropped under $2. The last time gas prices averaged $1 for the whole country was March 1999 when U.S. crude oil fetched less than $15 a barrel, roughly half what it does today.
A lot of factors would have to conspire to drop oil and gasoline prices that low, making $1 gasoline unlikely for the entire country. But the stars could align in some cities.
“If oil drops closer to $20 per barrel and refinery production remains strong, we could have hundreds of stations around the country selling gas for less than a $1,” said Michael Green, a spokesman for AAA.
Places like Texas, where there are lots of fuel-making plants and low taxes, are also likely candidates for ultracheap gasoline. Some corner stations may also want to post an eye-catchingly low price in the hopes of drawing more customers into the store to buy chips, soda and cigarettes, all of which have typically higher profit margins than gasoline.
“Many of these stations might be losing money on gas at that price, but it could still make sense as a business decision,” Mr. Green said.
Gas-station competition could help drive down prices in certain regions, much as happened on this Ewing, N.J., corner in 1998. PHOTO: CHARLES REX ARBOGAST/ASSOCIATED PRESS
While it may be a stretch for crude prices to collapse all the way to $15 a barrel this year, many more energy forecasters are predicting that the price of oil could slip into the $20 range and stay there for a while amid worries that a slowing Chinese economy will cast a chill on fuel demand.
U.S. crude production has remained stubbornly high, while Saudi Arabia and Russia have refused to curb their oil output. That puts all three on a collision course with Iran, which has said it hopes to pump an extra 500,000 barrels a day into the market as it tries to reassert its energy dominance now that the U.S. and European Union have lifted nuclear sanctions on the country.
Refineries, which have been running close to full tilt, are churning out excess fuel that is building up in storage tanks around the country, which is starting to cut into their margins. U.S. gasoline stockpiles surged to a record high of 254 million gallons at the end of January, according to the latest federal data. The surprise increase surpassed analysts’ expectations and helped pressure U.S. gasoline futures to trade under $1 for the first time since late 2008.
Cheap gasoline has long fueled Americans’ love of the open road and U.S. consumption is rising. In the first 11 months of 2015, drivers moved 2.9 trillion miles—a 3.5% uptick over the same period in 2014, the latest U.S. transportation data show. Gasoline demand during December was the highest for that month in eight years, according to API, the energy industry’s main trade association.
“The fact is, Americans still love to drive,” said Michael Jennings,chief executive of HollyFrontier Corp., which operates refineries from Tulsa, Okla., to Cheyenne, Wyo. “Drivers are in love with gasoline below $2.”
