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.