Gas Goes To $2, But Who Will Buy It?

Gas prices have plunged under $2 in a growing number of areas across the U.S. Extremely low oil prices and a fall-off in demand as fewer people travel creates a unique situation. Gas prices are at a multiyear low but demand is being sucked out of the market.

The drop in gas prices has become something of a perfect storm that will benefit the consumer. The Saudis and Russians have aggressively increased production in what has become a highly visible energy trade war. The U.S. shale producers, which face deep financial problems, have also continued to pump. So, supply is plentiful. As airlines curtain flights and people self-quarantine at home, driving has plunged in many cities.  A walk through New York City today shows the extent of the drop in car and truck traffic.

According to Gas Buddy, nine states have gas prices below $2, based on an average gallon of regular–Oklahoma ($1.87) Texas ($1.93), Mississippi ($1.95), South Carolina ($1.95), Louisiana ($1.97), Indiana ($1.98), Ohio ($1.98), Alabama ($1.99), and Arkansas ($1.99)

Another five states have gas prices under $2.05 and falling–Missouri ($2.01), Kansas ($2.01). Kentucky ($2.02), Michigan ($2.02), and Tennessee ($2.03).

The price is even lower in a number of cities. It is $1.88 in San Antonio, the 24th largest metro area in America. In Dallas, the 4th largest MSA, it is at $1.89. In Houston, the 5th largest MSA, it is $1.95.

And, sub-$2 gas has spread well north, geographically. It has dropped to $1.95 in Indianapolis, the 34th largest metropolitan area. It has dropped to $1.97 in Cincinnati, America’s 29th largest metro.

A spot check of individual stations around the country shows that gas has dropped to $1.70 in some locations.

Oil prices, which contribute about two-thirds of the total price of a gallon of regular gas have dropped from $54 a month ago to $33 on Friday. The price of gas lags oil by four to eight weeks because of time spent refining and transporting. Based on this drop, gas below $2 will be available in most states other than traditionally very expensive states which include Hawaii, California, Washington, and Oregon.

While it is still too early to measure what the effects of quarantines and sharp drops in commuting will be in terms of consumer demand for gas, it is bound to plunge if it has not already.

$2 gas will be plentiful, but will drivers be there to buy it.