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Fill 'Er Up
Gas Prices Fall to Six Year Low

Filling up at the gas station is feeling like much less of an onerous chore these days, as a surfeit of crude has helped push oil prices to new lows and, in so doing, has brought down the price of refined petroleum products like gasoline. In a survey of gasoline prices around the country last month, the American Automobile Association (AAA) found the national average price dipped below $2 down to $1.998, a level not seen since late March, 2009. Now the Energy Information Administration (EIA) is confirming what many drivers already know—that gas is a bargain these days—with its own survey data (that relies on different methodology). The EIA reports that the national average gas price fell to $1.996 this week:

…The U.S. average retail regular gasoline price had last approached, but not gone below, the $2.00 mark in early 2015. Falling gasoline prices are a result of falling crude oil prices and the seasonal slowdown in gasoline demand.

Four of the five regions in the United States currently have averages below $2.00/gal, with the exception of the West Coast, where the retail regular gasoline price averaged $2.63/gal on January 11. Gasoline prices on the West Coast tend to be higher than elsewhere in the country because of the region’s relative isolation from other gasoline markets and higher state taxes. Additionally, gasoline supply chains on the West Coast are adjusting to several refinery outages that occurred in 2015, which tightened gasoline supplies and increased prices.

During the recent decline in gasoline prices that began this fall, the U.S. Gulf Coast was the first region where prices were below $2.00/gal, which occurred in late October. Average gasoline prices in the Midwest and the Rocky Mountains fell below $2.00/gal in November and December, respectively. The East Coast average gasoline price was $1.999/gal as of January 4, 2016, making it the most recent region with a sub-$2.00/gal gasoline price.

Between the China bubble bursting (weakening global demand for oil) and suppliers both within and without OPEC all pumping like there’s no tomorrow to protect market share, it’s no wonder that the market is oversupplied. Iran is set to unload new supplies in the coming months, too, as it seeks to boost output in the wake of Western sanctions being lifted, so there’s no reason to think $20 oil prices are all that far off.

As a result, the EIA expects gas prices will stay low throughout 2016, dipping down to $1.90 per gallon next month while averaging just $2.03 over the year. Next year should be similarly driver-friendly, as the EIA projects gas prices to average just a bit higher at $2.21 per gallon.

All these gas savings mean more money in American drivers’ pockets, and to this point it looks like people aren’t being shy about spending that extra cash, and that increased consumer spending should have knock-on benefits for the economy. So while America’s oil industry reels and the world’s petrostates suck in their fiscal guts to tighten their belts, average Americans are enjoying the fruits of a bearish crude market.

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  • Unless you live in California.

    • Kevin

      “gasoline supply chains on the West Coast are adjusting to several refinery outages” – When have there not been refinery outages there? This seems Ike a perpetual excuse.

      • Dale Fayda

        There haven’t been any new refineries built in CA in decades and it’s well-nigh impossible to build one now, even if there was an oil company masochistic enough to want to deal with the mountains of regulations and artificial delays put up by the SF Bay liberal psychopaths who run this state. Hence, perpetual shortage of refining capacity. Are the refinery operators playing this for all that’s worth? Probably. Would it be the case if there was a healthy amount of competition among them and new refineries in the works? Probably not.

        • Andrew Allison

          All true, but not the reason for the ridiculously high price of gas. See the comment above.

    • Andrew Allison

      Right. Here’s why gas is so expensive in Cali-fornicate-the-voters.
      39 cents for excise tax
      30-42 cents for sales tax
      10 cents for cap and trade “fee”—tax on a tax
      18.4 cents federal excise tax
      plus a roughly 12 cent cost for the special blend required only in CA.

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