With a slump in demand and record-low oil prices, U.S. gasoline prices are likely to remain competitive until the end of this year. Surveys have revealed that the average price per gallon of regular gasoline was sitting at $2.22 this Labor Day, down from $2.57 at the same time last year.
In some parts of America, the price for regular is below $2, including in Texas, Louisiana, Arkansas, Missouri, Oklahoma, Mississippi, and Tennessee.
In states excluding the East and West coasts, prices haven’t been this low during Labor Day in over sixteen years. Here’s what’s causing the change, and why it’s good news for consumers…
Low Demand During Health Crisis
Statewide lockdowns lowered the gasoline demand earlier this year. As professionals stayed home to work and families avoided traveling, gasoline companies saw slower sales.
While lockdowns have been relaxed throughout most of the country, many families are still choosing to stay at home and limit their social interactions to close friends and family members. Road travel has decreased and people are less likely to take vacations.
Oil benchmarks are also down, which has decreased the production cost of gasoline. Some of the savings have been passed on to consumers. West Texas Intermediate, the key U.S. benchmark for crude oil, is tracking at $39.22 per barrel today, compared to $54.85 a year ago.
Crude prices are likely to remain low due to excess production in America and other major oil-producing nations. In recent years, America has become self-sufficient in its energy production. This may end up hurting the market as other producers haven’t slowed their activities.
Low Prices Will Continue Through to 2021
Gasoline consumption is expected to be down year-over-year throughout the next four months. High unemployment, a lack of commuting, and limited recreation will all contribute to a slowed gasoline market.
While oil companies, refineries, and retail gasoline companies will see lower revenue, consumers will benefit. With the economy in recession and unemployment high, lower gas prices are a small form of relief for struggling families and individuals.
Long-term, prices for both crude and gasoline are expected to recover along with the economy. Several Coronavirus vaccine candidates and treatments are currently in development. Any news of progress in this area could invigorate consumer spending and increase gas demand.
In the meantime, at least, consumers will enjoy the lower prices.
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