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Gas Can Be Had For Less Than $1 A Gallon In Michigan

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Fuel is getting crazy cheap, OPEC appears to be unable to stop the slide, and global factories are slowing due to a dearth of demand. It’s a dreary Monday, and it’s the Morning Shift for April 13, 2020.

1st Gear: Below! A Dollar! A Gallon!

We already covered this a bit last week, but I think it bears repeating, if for nothing else than my Coastal Elitist Snobbery–addled mind cannot comprehend fuel this cheap. Some of you Olds among us may remember the price of gasoline being below a buck, but back then everyone was huffing lead, so it DOESN’T COUNT. The cheapest I can remember gas ever being was in the ‘90s, and even then it was about $1.20 per gallon.


Even now, from where I write this in the New York City suburbs, a gallon of regular at my local Mobil station is around $2.70. Below a dollar is wild. But gasoline is just that cheap in Michigan, the home of the American car, the Detroit News reports:

The average price of regular gas in Michigan was $1.58 on Wednesday, considerably below the $1.91 nationally. Michigan’s price fell 10 cents in a week and 66 cents in a month. Some stations in Detroit are pumping gas for under $1: the Costco in Madison Heights, for instance, had it for 89 cents Wednesday.


Part of Michigan’s cheap gas prices are due to the state’s favorability towards the automotive industry, but mostly it’s due to a vast amount of oversupply, with more than 50 days worth of fuel just sitting around. The whole system was primed for people to keep driving, and no one’s going anywhere. And Michigan isn’t alone, as the rock-bottom prices for fuel are expected to spread nationally, according to CNBC:

“I’m pretty sure these wholesale prices and spot prices are as low as anything we’ve seen since before the Arab oil embargo” in the early 1970s, said Tom Kloza, head of global energy analysis at Oil Price Information Services. “I think you are going to see much more common sub-$1 gasoline prices in the nation’s midsection, and I think we are looking at a national average of $1.25 to $1.50″ at the pump.

The utter collapse in fuel prices is being caused by the Coronavirus pandemic, of course. Drastically fewer people are commuting in the United States, but petroleum is a global commodity, and across the world people aren’t just driving less, whole economies are coming to a halt.

The demand for fuel has evaporated by nearly half, CNBC reported.

And while it may appear that this would only fuel an enormous SUV boom, or kill electric cars, or whatever other wildly spendy fantasies you may have, unemployment claims are also through the roof. People can’t buy enormous SUVs if they don’t have jobs.


2nd Gear: But That Won’t Stop OPEC From Trying

The Organization of the Petroleum Exporting Countries, or OPEC, is desperate to stop oil prices from dwindling even further and thus officially moved to cut more than 9 million barrels’ worth of oil production starting in May, Bloomberg says. But because it’s OPEC, a cartel of countries who are all competing with each other while maintaining the pretense of cooperation, “officially” is the key word. Everyone in OPEC is concerned with maintaining market share for when this is all over, and that means that oil prices should still go down further:

Mexico will reduce output by 100,000 barrels a day, after rejecting its 400,000 barrel-a-day share of the original deal. President Donald Trump helped broker a compromise that allows the Latin American nation to count some of the U.S. market-driven supply decline as its own.

The OPEC+ alliance initially met on Thursday via video conference. That was followed on Friday by a virtual gathering of G-20 energy ministers, who pledged to take “all the necessary measures” to maintain a balance between oil producers and consumers.

“The scale of production cuts is a move in the right direction, but considering how badly demand is affected, it was never going to be significant enough to push the market closer to balance,” said Edward Bell, senior director for market economics at Emirates NBD PJSC in Dubai.

“Is Russia going to cut production by 2.5 million barrels a day in two weeks? That’s a pretty steep ask.”


I’m pretty sure there was an It’s Always Sunny in Philadelphia episode about this.

3rd Gear: Can’t Build If Nobody’s Buying

South Korea has been mostly spared the devastation the Coronavirus pandemic has wrought, thanks to a swift and competent government response (and South Korea is now sending testing kits to the United States, after the American government issued a desperate request for foreign medical aid). That should, in theory, mean that South Korean factories should be up and running again, since everyone’s healthy and everything is great.


Except that everything is not great, and there’s no point in making cars if the demand has evaporated, according to Reuters:

Kia Motors Corp (000270.KS) told its labour union in South Korea that it wants to suspend operations at three of its domestic factories as the coronavirus outbreak weighs on exports to Europe and the United States, a union official said on Monday.

The union has not yet decided whether to accept the plan - under which operations would be suspended from April 23-29 - because negotiations over pay are ongoing, the official said.

“Kia Motors is currently reviewing the suspension of some of its plants in Korea in response to declining global demand due to COVID-19. However, a decision has not been made at this time,” Kia Motors said in a statement.


I guess the question weighing on everyone is how the global economy gets going again, once this is all over.

4th Gear: It’s Not As Easy As ‘Oh I’d Like To Buy Some Things’

Once the pandemic threat has passed, however, it’s not as simple as flipping a switch in the car factory from “NO MAKING CARS” to “YES MAKING CARS.” Whole supply chains need to be rebooted, Automotive News notes:

Unless the North American auto industry begins now to plan and coordinate the restart of factory production in the weeks or months ahead, it could find broken supply lines and a frustrating series of shortages.

The real-world worries now being expressed by some executives and consultants include suppliers with too little cash to pay for manufacturing restarts, a tussle over limited raw materials, the absence of smaller Tier 2 and Tier 3 companies because of insolvencies and even the disappearance of myriad regional trucking companies relied on to keep industry manufacturing chains linked together.

“You’re talking about starting up 50 or so major auto plants at the same time,” said Dietmar Ostermann, U.S. automotive advisory leader at PwC, who is working with auto companies across the continent. “Going from zero back to 100 [percent], all at once. That’s never been done.


I have the feeling that first things are going to get even worse, and then, they’re going to get even weirder.

5th Gear: Well That’s One Way To Do It

One way to jump start an international economy is to have national governments just pour money into infrastructure spending. Like China is probably going to do, the Financial Times says:

Japanese conglomerate Hitachi anticipates a wave of infrastructure spending in China as Beijing tries to turbocharge the economy’s recovery from the coronavirus outbreak.

The group, which makes everything from nuclear power plants to bullet trains, said its elevator factory in China had resumed production and that it expected the construction industry to rebound as cities end their lockdowns.

“These situations create the need for governments to actually get the workforce back and therefore infrastructure spending will rise,” said Alistair Dormer, head of group’s rail and mobility businesses. “All the indications are that China is going ahead at full speed.”


That is very cool, for China. Infrastructure spending doesn’t just inject cash directly into an economy by employing thousands upon thousands, if not millions of workers doing all the construction. National infrastructure is also the vital skeleton upon which national economies are hung, and without a robust infrastructure system in place, they are crippled.

Oh, speaking of – anyone know whatever happened to infrastructure week? We should probably get back to that, at some point.


Reverse: ‘Motor Tricycle’ Is A Generous Name For It

1902 – The French racer Georges Osmont set a speed record of 67.8 mph (109.1 km/hr) in Nice with a De Dion-Bouton motor tricycle.


Neutral: What’s The Lowest MPG You Can Find?

Let’s play a silly game, because most people are locked up anyway. Sure, it’ll kill the planet, but what’s the car with the lowest fuel efficiency you can find?