Gas prices at the pump could drop below $2 per gallon as the national average if producers such as Saudi Arabia flood the market with cheap oil as part of the current spat over output, analysts say.
The plunge started after Russia rejected a proposal by OPEC to cut its crude oil production by 1.5 million barrels a day. In apparent retaliation, Saudia Arabia cut prices for buyers over the weekend. That came after coronavirus concerns had already started to drag down demand for oil used in transportation.
Under basic economics, high supply and lower demand tends to drive prices lower. In this case, much lower.
“Pump prices are likely to decrease through the end of the winter driving season, especially amid concerns about the coronavirus causing the price of crude to decline,” said Montrae Waiters, spokeswoman for AAA – The Auto Club Group, in a statement.
The current national average gas price is $2.381, according to AAA. One month ago it was $2.435.
“We have already been seeing gas prices drop since Feb 20,” wrote Allison Mac, an analyst at GasBuddy.com. “Now, with Saudi oil price discounts, and not cutting back oil production, the world is being flooded with oil when demands have been some of the lowest we have seen. This only means gas prices continue to decrease more dramatically, until something changes.”
But other experts cautioned that it’s too soon to tell where and and how the price drops will hit.
“The plunge in oil prices will translate into savings at the pump for American consumers. But when and how much will depend on when the lower-priced fuel gets into the tanks at the service station, and given the current disruptions to global commerce and supply chains, nothing can be taken for granted,” wrote Greg McBride, chief financial analyst for Bankrate.com.
“Some stations may cut prices right away for competitive reasons, but any meaningful impact on consumers’ pocketbooks will require the lower prices to hold through the spring and into summer driving season,” McBride wrote.
Ohio gas stations in the Cleveland region are already posting signs listing regular unleaded for $1.86 to $1.99 per gallon.
At a Sheetz gas station about 30 minutes south of Cleveland, manager Jen Raskow said she was grateful that the sign out front was electronically controlled by corporate headquarters. That way she and her employees wouldn’t have to be out front with a pole constantly changing the prices.
But as a driver she said she doesn’t pay that much attention to the price, except to get her gas closer to where she works than where she lives, where it is more expensive.
“I have to drive over 100 miles to work every day,” said Raskow. “No matter the price, I have to fill up.”