Energy

Gas Prices Drop Toward $1

Douglas A. McIntyre

Published: December 30, 2015 9:15 am

Last Updated: January 13, 2020 3:35 pm

In some gas stations around the country, the price of a gallon of regular has dropped below $1.47. AAA and GasBuddy, two organizations that follow gas prices, say that gasoline prices below $2 will be routine around the United States. As oil prices fall, and refinery capacity stays strong, the price of gas could reach $1 a gallon, a level last reached in 1999. As a matter of fact, the entire states of Kansas, Missouri, Oklahoma, South Carolina and Tennessee have gas prices that average at or below $1.75.

Gasoline prices are driven mostly by four factors: oil prices, proximity to refineries, refinery capacity and state taxes and levies. Oil prices have dropped below $40, recently hitting $35 a barrel. The recent decision by Saudi Arabia to continue to keep its oil exports high has essentially dissolved the OPEC cartel. And the decision also has forced the kingdom to chop its 2016 budget. This decision guarantees oversupply of crude. At the same time, slowing national economies in the largest countries, including China, will lower demand. China now tops the list of oil importers, according to the Financial Times, having moved ahead of the United States.

The cost of producing oil from shale deposits is greater in some cases than what it can be sold for. Nonetheless, parts of this industry continue pumping, increasing supply, while others go bankrupt because they cannot survive with crude prices so low.

Several states house large refineries or are close to those that do. This is particularly the case near the Gulf of Mexico, including the massive refinery operations south of Houston. Some owned by Exxon Mobil Corp. (NYSE: XOM) pump several hundreds of thousands of barrels per day.
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Finally, gas taxes in several states are well below the national average of $0.4869 a gallon, according to the American Petroleum Institute. In some low gas price states, these taxes are below $0.40. This includes South Carolina at $0.3515, Missouri at $0.3570 and Oklahoma at $0.3540.

The odds grow each day that gas prices will be $1 a gallon in some areas in the United States, particularly those where prices are already below $1.50.