As of yesterday, more than 40 percent of gas stations nationwide were selling gasoline for $2.00 per gallon or less, compared to just a handful on this same date last year. Fewer than one percent of stations nationwide are selling gasoline for more than $3.00 per gallon, compared to 13 percent of stations one year ago.
With gasoline supplies high and oil prices low, pump prices are likely to remain relatively cheap through the remainder of the summer and into the fall. While a record number of American motorists have hit the road for summer travel, sharply lower gas prices have not triggered the sharply higher gasoline demand that many analysts had anticipated. This was evident in last week’s Energy Information Administration report, which revised the mark for U.S. gasoline demand in May lower by 213,000 barrels per day to 9.436 million. While lower than first reported, this demand number was still the highest total on record for the month of May.
Despite the lowest seasonal prices in more than a decade, unexpected events could trigger higher prices. Rising crude oil costs due to a disruption in supply, stronger than expected economic growth or geopolitical tensions overseas could lead to higher pump prices nationwide, or regional prices could increase due to refinery problems, production cuts, stronger than anticipated demand, or hurricanes that impact distribution and production, which has happened in several Midwestern states over the past week.
Gas prices in three more states have dropped below $2.00 per gallon over the past week, bringing the total to fourteen states: South Carolina ($1.84), Alabama ($1.88), Tennessee ($1.89), Mississippi ($1.91), Arkansas ($1.92), Oklahoma ($1.92), Missouri ($1.93), Virginia ($1.93), New Jersey ($1.93), Louisiana ($1.95), Delaware ($1.96), Kentucky ($1.98), Texas ($1.98), and Georgia ($1.99).
Gas prices are dropping on the West Coast, but it remains the most expensive market for gasoline, including the only four states where drivers are paying more than $2.50 on average: Hawaii ($2.76), California ($2.73), Washington ($2.62), and Alaska ($2.62).
West Coast pump prices remain the highest in the country, but drivers in this region will find some solace in the substantial savings from one year ago. Led by California (-$1.03), the only state in the nation where drivers are saving a dollar or more year-over-year, West Coast states are seeing some of the largest yearly discounts, including California, Alaska (-86 cents), and Nevada (-77 cents). Last year, following a number of unexpected refinery issues in California, gas prices surged during the peak driving season across the region. This year there have been relatively few refinery issues, which has helped prices follow the national trend lower.
Gas prices in the Rocky Mountains continue to be among the most stable in the nation. Barring any regional refinery issues, prices for drivers in the Rocky Mountain states are likely to remain relatively flat through Labor Day and may decline even further once the summer driving season has concluded.
Great Lakes and Central States
Gas prices in the Great Lakes region continue to be among the most volatile in the nation, as refinery outages and declining supplies have put upward pressure on prices. This includes the most dramatic overnight change (Michigan, +3 cents), weekly change (Indiana, +10 cents) and monthly change (Illinois, -27 cents). The recent refinery outages include planned maintenance at Phillips 66’s Wood River, Illinois refinery and unplanned issues at CVR Energy’s Coffeeville, Kansas plant; BP’s Toledo, Ohio refinery; Husky’s Lima, Ohio, refinery; and CITGO’s Lemont, Illinois refinery. While production at these facilities has been impacted and regional gasoline stocks have dropped by 10 million barrels from early February, overall production for the region was reported by the EIA to have remained strong at 2.723 million barrels per day.
While prices in the Central United States are not immune to the volatility of their Great Lakes neighbors, motorists in the Central region continue to pay some of the cheapest gas prices in the country with Oklahoma ($1.92) and Missouri ($1.93) each featuring in the top-ten least expensive state averages.
Mid-Atlantic and Northeast
Pump prices in the Mid-Atlantic and Northeast continue to drop, and while New York, Connecticut, Vermont, and Maine appear in the top-20 state averages, three other states in the region (Virginia, New Jersey, and Delaware) are now below $2 per gallon. These lower prices come even as some traders are watching announcements of planned reductions in production from refineries supplying the region as profit margins have narrowed.
South and Southeast
Gas prices across much of the South and Southeast are at or below $2 per gallon. Motorists in South Carolina, Alabama, Tennessee, Mississippi and Arkansas are enjoying pump prices among the top five cheapest in the nation. The bulk of America’s refining capacity is in the Southeastern United States, and abundant production in the region should keep prices relatively low barring a hurricane or other unexpected event.
Oil Market Dynamics
Ample domestic oil supplies and a strengthening U.S. dollar have contributed to West Texas Intermediate crude oil prices testing lows not seen since Spring. WTI is priced in U.S. dollars, so as the dollar strengthens, the price of oil becomes relatively more expensive for those holding foreign currencies. This makes oil a less attractive investment and helps reduce prices. If this trend continues, WTI could drop below $40 per barrel for the first time since April 18. At the close of Friday’s formal trading session on the NYMEX, WTI had recovered slightly from Thursday’s multi-month low to settle 46 cents higher at $41.60 per barrel.