The coronavirus pandemic and a dispute between Russia and Saudi Arabia that saw production shoot up created a perfect storm for low gas prices, as demand collapsed and supply increased. A tentative deal to curtail production and the fact (false hope?) that shelter-in-place won’t be around forever mean that cheap gas won’t either. Still, the numbers for now are jaw-dropping.
The average for the U.S. dropped again this week, according to AAA, to $1.88 per gallon, which is down about one cent from yesterday, about seven cents from a week ago, about 48 cents from a month ago, and about 88 cents from a year ago.
That average, AAA said, was likely to keep going down in the coming weeks, as shelter-in-place orders across the US are expected to remain in place at least until the beginning of May. They will also go lower because the deal to cut production between oil-producing countries isn’t finalized, according to The Wall Street Journal, with Mexico a holdout, though even if it had been finalized it will take awhile for it to have a great impact on prices at the pump.
Demand, meanwhile, is expected to fall even more.
Here’s the Journal:
Even as the deal looked nearly completed, investors remained concerned that the cuts might not be enough to support higher prices in the coming weeks as world-wide lockdowns pummel demand for gasoline, diesel and jet fuel. The curbs will mitigate some issues in oil markets, “but in a sense, it’s too little, too late for this month, given the collapse in demand. The boats are loaded, the pipes are full and the refineries are cutting runs,” said Saad Rahim, chief economist at commodities trader Trafigura.
Global oil consumption is on course to plunge by almost 35 million barrels a day in April, according to Mr. Rahim.
As the coronavirus outbreak moves across the world and leads to travel restrictions and work stoppages, oil consumption is expected to collapse by as much as 30 million barrels a day this month.
Lots of places have seen gas sold for well less than AAA’s $1.88 average, of course, including several stations selling for under a dollar a gallon in Oklahoma, Michigan, Kentucky, Ohio, Wisconsin, Tennessee, and probably some other states that aren’t showing up in the first few pages of Google. It’s always when you need it the least.