Forget the price of gasoline falling below $2. In four American cities, the average price of a gallon of regular has dropped below $1.75. Enough cities have prices just above that so that the number of such places could more than double in a month.
A year ago, it was inconceivable that the average price of a gallon of gas would drop below $2 anywhere. The national average was $3.32, which means in states that have the highest prices, such as Alaska and Hawaii, prices were at $4 or above, and in many states higher than $3.50. Now, the highest price per gallon on average within the Continental United States is New York’s at $2.60.
The four cities with average gas prices below $1.75 are Wichita ($1.72); Kansas City, Mo., ($1.73); Tulsa ($1.73); and Colorado Springs ($1.74), according to GasBuddy.
Oil prices, transportation costs and state gas taxes are the primary contributors to gas prices. Surprisingly, Colorado has one of the highest tax figures at $0.404 per gallon, and Kansas is at $0.424, according to the Tax Foundation. The figure is much lower in Missouri at $0.357 and Oklahoma at $0.354. So, tax rates may contribute, but not enough to be the primary determining factor.
Proximity to large refineries is critical also. Oklahoma certainly benefits from that.
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The main reason the price of gas in these states and cities will continue to fall is declining oil prices. Goldman Sachs recently moved its target for crude to $42, down from the current price of $47. Oil was over $100 a barrel last June. Speculation is that the equivalent of a price war between U.S. shale producers and OPEC (primarily Saudi Arabia) will drive prices lower. This gets coupled with a sharp slowing of demand in recession-threatened Japan and Europe, as well as GDP growth at multiyear lows in China.
Although oil prices and gasoline prices are not exactly married, crude may well drop another 10% to 15%. That would help drive the price of an average gallon of regular under $2 in the United States as a whole and below $1.75 in a large handful of cities.
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