Midwest Gas Prices Hit 12-Year Low

Pump prices for gasoline could be well on their way to less than a dollar a gallon in some parts of the Midwest as refiners begin the switchover in production to summer-grade fuel. The five states with the lowest gasoline prices Tuesday morning were Oklahoma ($1.365 per gallon), Missouri ($1.409), Indiana ($1.450), Kansas ($1.460) and Ohio ($1.470).

These prices are among the lowest in a dozen years, according to GasBuddy, and the pricing trend continues to point downward, leading GasBuddy to conclude that the “previously unthinkable 99-cent gasoline [is] becoming a strong possibility as wholesale gas prices plunge amidst growing supply.”

Senior petroleum analyst Patrick DeHaan adds:

Wholesale gasoline prices in the Midwest have lost more than half of their value since the beginning of the year and prices at the pump haven’t fully reflected that yet. Incredible as it sounds, we wouldn’t be shocked to see a few stations in these states as low as 99 cents a gallon.

Lower prices for crude led refiners to raise production toward the end of last year, and now, even though capacity utilization is around 85%, the supply of gasoline continues to build. The latest report on miles traveled by U.S. motorists showed November totals up 4.3% year over year for the month. The 12-month moving average adjusted for population growth, however, rose just 0.27% and remains about 5.7% below peak miles driven in June 2005.

Why Americans are driving less is arguable, but what is not arguable is that the U.S. vehicle fleet is more fuel-efficient in 2015 than it was in 2005, by more than five miles per gallon on every new car sold.
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At the current Brent crude price of around $32.50 a barrel, a gallon of gasoline could be expected to cost $1.65. That it is nearly 30 cents a gallon cheaper indicates that demand is down and, what could be worse for producers, that demand has been destroyed.

Gasoline prices should stop their free-fall soon as refiners go into the summer fuel turnaround. Summer fuel is also more expensive to refine than winter fuel, and that should also slow the slide. If some U.S. drivers are going to see prices below a buck a gallon, it had better happen before the end of March. And right now, it looks like the Midwest is where the sub-$1 price will happen.