Pump prices sliding faster
The retail gasoline industry was facing the kind of crisis Monday that motorists love.
Prices had dropped so low that filling station owners in several states were frantically digging out their old $1 price signs as the cost of a gallon of regular gas fell below $2 for the first time in years.
This week, the big thing in fuel prices isn’t worries about $200-a-barrel oil. It’s gasoline at $1.99 a gallon and lower in parts of at least 15 states, analysts said.
The unprecedented slide in pump prices seemed to be accelerating Monday. According to the Energy Department’s weekly survey of filling stations around the U.S., the average price for a gallon of self-serve regular gasoline fell 25.6 cents nationally to $2.40 over the last week, the lowest since gasoline sold for $2.371 a gallon on Nov. 6, 2006. That’s a drop of $1.955, or 44.9%, since the nation’s record high of $4.355 a gallon set June 23 and June 30 this year.
In California, home to the most expensive gas in the continental U.S., the average pump price plummeted 34.7 cents in the last seven days to $2.783. The California average had not been below $3 a gallon since Oct. 8, 2007. It was the lowest state average since $2.710 on Feb. 19, 2007.
The Energy Department numbers tracked very closely with those of the American Automobile Assn.’s fuel gauge report, which uses a separate survey of credit card receipts from 100,000 filling stations around the country conducted by the Oil Price Information Service and Wright Express.
Amid whatever relief motorists were feeling from the drop in prices, there was still the sobering thought that it had come at a high cost for much of the nation. Gasoline prices were like an obese person who had finally managed to drop a lot of weight, but only because he had contracted malaria, said Phil Flynn, vice president and senior market analyst for the Alaron Trading Co., who noted that demand was down in part because the U.S. economy was so weak that consumers were spending money only on essentials.
“There is just no demand for gasoline these days,” Flynn said. “In the past, when prices dropped after a high spike, demand always came roaring back, but not now with the economy struggling this much.”
Flynn said that an average gas price of $2 a gallon or lower for the nation was possible and that it could go as low as $2.25 in California.
At the Flying J station in Corning, Calif., self-serve regular could already be found for $2.25 a gallon. In Southern California, $2.45 a gallon could be found at a Sam’s Club in Long Beach and a Costco in Marina del Rey.
That wasn’t exactly low enough to make carpenter Alvaro Mendez jump for joy, but it was a noticeable improvement from last summer’s prices.
“I probably saved $15 a tank from the worst I saw then. That’s a lot better than it was,” said Mendez, 47, who said he could get 30 miles per gallon in the 2006 Toyota Corolla that he drove to the Sam’s Club and that he preferred to drive when he didn’t need a pickup full of tools. But the gas price drop wasn’t enough to get Mendez to drive more often than necessary or with a heavier foot. Prices for everything else he has to buy, including work supplies, haven’t fallen yet, he said.
Meanwhile, the rest of the U.S. was hurtling back toward a level some thought might never be seen again, down to averages as low as $2.20 a gallon or below in 10 states, including Missouri at $2.078 and Oklahoma at $2.074, according to the AAA fuel gauge report. The Missouri and Oklahoma prices dropped by more than a dollar in just the last month.
Some prices declined even more dramatically, according to gasbuddy.com, a private, nationwide service of websites in each of the 50 states and in several cities and towns where motorists report the lowest and highest prices they see. Gasoline could be found for less than $2 a gallon in parts of the Midwest and South, where it had previously soared as high as $4.50.
Gas could be found for $1.83 to $1.92 a gallon in parts of 15 states. It was selling for $1.79 a gallon at the Country Store in Meridian, Miss., where the manager said she was happy she had switched this year to digital price signs that could be changed remotely.
“We don’t even know where the old $1 signs are,” said Crystal Alnumir, the station’s manager.
“We’re seeing a lot of customers today,” said her husband, Max, who barely had time to talk on the phone between motorists ringing up their gasoline purchases. “A lot of customers.”
Crystal Alnumir said her suppliers informed her of the price on Halloween, so she was convinced that most customers that day thought it was a joke. But business tripled, she said, as the weekend wore on. “It’s been absolutely crazy. Our regular customers can barely get in to see us,” she said.
But analysts were also warning that the plunge in gasoline prices had been so precipitous that it was rushing toward its own end, which could happen any time between next week and Presidents Day.
“Today is just unbelievable. People talk about crude dropping to the $60s” per barrel of oil, said Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey. “But wholesale gasoline is trading for less than crude in every bulk market across the country.”
He was describing an extremely rare situation in which the U.S. economy was so weak, and consumer spending and demand for gasoline so low, that the spot price for wholesale gasoline was lower that the price for the oil it had been refined from.
In California, the price for the nation’s most expensive raw or unfinished gasoline, known as CARBOB, was running Monday at less than $1.45 a gallon, or about $61 a barrel.
Poor U.S. manufacturing numbers sent crude oil futures for December delivery sliding again, but not that low. They dropped $3.90 on the New York commodities market to close at $63.91 a barrel.
Simply put, refineries would not be able to make a profit at these prices and would probably begin to scale back production.
“If there was a renaissance for refinery products a couple of years ago, this is the toilet,” Kloza said. “This is rugged stuff.”
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