U.S. oil prices have plunged recently at a rate greater than any time since 2014. This was partly due to an OPEC (particularly Saudi Arabia) battle with Russia on production levels. The plunge also was due in part to the fact that coronavirus will harm businesses enough worldwide that demand will be sucked out of the market. That process apparently already has started.
Gasoline prices are almost directly tethered to oil prices. Other factors, including taxes and refinery capacity, are important as well, but to a lesser extent. Most estimates are that oil prices are 60% of the price of gas. The cratering is great enough so that in some large cities, the price of a gallon of regular gas is already below $2.
Benchmark West Texas Intermediate (WTI) crude has had a breathtaking drop in just a few days, from $53 a barrel on February 23 to just above $32. That is a 40% sell-off in two weeks.
According to AAA, the price average price of a gallon of regular gas has dropped to just under $2.33 nationwide. That is down from $2.41 a week ago. If gas prices drop as much as oil prices, they will be well below $2 within a few weeks. Gas prices generally lag oil prices by several weeks, sometimes longer.
The price of gas in some cities, particularly those near the Gulf refineries south of Houston, has dropped well under $2. In Tulsa, it is $1.85 a gallon. In Oklahoma City, it has fallen to $1.90. The price in San Antonio is $1.91. In Dallas, it has fallen to $1.94. In Austin, it has dropped to $1.98. In Columbia, South Carolina, it has fallen to $1.93. As far north as Fort Wayne, Indiana, the price as dropped to $1.99.
If the price of oil remains around $33 a barrel for several weeks, the price of gasoline will dive by Memorial Day, when driving in America hits one of its peaks. While that may make driving more affordable, the effect of the coronavirus already may have undermined the U.S. economy and restricted travel.
While $2 a gallon gas may be on the way, not everyone will be able to take advantage of it.
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