Much lower fuel prices means “pain at the pump” is now a thing of the past. How low will gas prices go? Will prices stay low for the foreseeable future?
Gas prices are tumbling and in some areas of the country are the lowest we’ve seen this century. As of this writing, the average price of a gallon of regular gasoline sits at $1.861, according to Gas Buddy, the fuel price tracking website.
Driving the lower prices has everything to do with supply and demand. Domestic production has nearly doubled over the past few years and countries such as Canada and Iraq are producing more oil year after year. And despite feeling the squeeze from the west, Russia continues to pump oil. Thus, with the US essentially not needing much fuel from abroad, its former suppliers are looking for new markets. Those markets aren’t as lucrative as North America and Europe, therefore prices have fallen accordingly.
A Price War in Michigan
The new, lower prices are still above the $1.592 average reached on December 29, 2008. However, prices in some areas of the country are much lower as gas price wars have erupted. Notably, one station in northern Michigan dropped its price to 47 cents per gallon for regular gasoline earlier this week. Prices around Houghton Lake later rebounded, but one station is still charging $1.30 per gallon this morning.
Today’s fuel prices are part of a downward trend that began about 18 months ago when prices were averaging $3.58 per gallon. The international price for crude oil, once above $100 per barrel, is now below $30 per barrel and is expected to continue to fall. As a matter of fact, Iran is expected to produce upwards of 500,000 barrels of oil daily as economic sanctions against the Islamic Republic have been lifted. As long as supply outstrips demand, lower prices at the pump should continue.
Consumers are, of course, elated with the lower prices. Refueling a large SUV once cost more than $125, a painful price point that had people avoiding models such as the Chevrolet Suburban and the Ford Expedition. That same Suburban with a 31-gallon fuel tank might now set the owner back by approximately $50 with the tank nearly empty.
Greater Demand for SUVs
Falling fuel prices continue to spark greater interest in pickup trucks and sport utility vehicles. In 2015, US consumers purchased 17,470,499 new vehicles, setting an all-time record. Of that number, 9,729,587 were classified as light trucks, leaving 7,740,912 passenger cars, according to Motor Intelligence by Autodata Corp. Thus, 55.69 percent of all new consumer vehicles purchased last year were either SUVs or pickup trucks.
A scan of fuel prices across the nation this morning reveals sharply divergent prices and those prices are not always dependent on the region. Oklahoma currently holds the distinction of offering the lowest gas prices, averaging $1.539 across the Sooner State. Prices are averaging even lower in the northeast corner of the state, reaching $1.392 per gallon this morning.
On the other end of the pricing spectrum is California with prices averaging $2.72 per gallon or about a dime higher than the second most expensive state, Hawaii. For the most part, prices in the Golden State are tracking below $3 per gallon, although motorists in Mono County are still paying $3.502 per gallon on average. If you live in Yuba County, you’re saving more than a dollar per gallon as average prices there are coming in at $2.335 per gallon.
Looking Ahead
Fuel prices are not likely to rebound in the immediate future. Even as oil production is lowered, demand remains flat in many countries. As long as oil production outstrips consumption, we’ll see lower prices maintained. That also means consumers will continue to gravitate to larger and heavier vehicles with sedans and especially electric vehicles left in the dust.
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