Lynn Doan and Dan Murtaugh (c) 2014, Bloomberg News. HOUSTON — For the first time in five years, $2 gasoline is making a comeback in some parts of the U.S., just in time for the Christmas holiday.
Retail stations scattered across the U.S. South and Midwest are about 20 cents shy of the $2-a-gallon mark. In New York, gasoline futures slid more than 13 cents Friday in response to OPEC’s failure to cut oil production. That decline alone could drag down pump prices by as much as 20 cents a gallon, Michael Green, a spokesman for the Heathrow, Florida-based motoring club AAA, said by telephone.
“We could see the cheapest 1 percent of stations get within a few pennies of $1.99 over the next two weeks,” Patrick DeHaan, a senior petroleum analyst at GasBuddy Organization Inc., said by telephone from Chicago. “We’ll see at least one station in the nation at $2 by Christmas. And that’s not really a prediction at all. That’s more like a certainty.”
The motor fuel has slid by almost a dollar a gallon in the U.S. from this year’s peak, giving Americans at least $500 annually in extra disposable income by IHS Inc. estimates. The last time the country’s average gas price was below $2 was on March 24, 2009, while in the grips of the recession.
Gasoline futures sank below $2 a gallon this month for the first time since September 29, 2010. The average pump price was $2.792 Thursday, down 90.4 cents from this year’s peak of $3.696 on April 26 and the lowest since Oct. 8, 2010, data compiled by AAA show. The average has fallen for 64 consecutive days, the longest streak since 2008, Avery Ash, AAA’s director of federal relations based in Washington, said by telephone.
The Organization of Petroleum Exporting Countries, responsible for about 40 percent of the world’s oil supply, will maintain its collective crude output target at 30 million barrels a day, Saudi Arabia’s Oil Minister Ali Al-Naimi said after discussions in Vienna Thursday.
“Given that OPEC has decided not to cut production and, for all intents and purposes, are entering into a market share war with the rest of the world, $2 a gallon could be in the cards,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consulting firm in Houston, said by phone. “I don’t think anyone would have said that at the beginning of the year, or a month ago, or even a week ago.”
The nation’s cheapest gasoline was at a DM Food Mart in Oklahoma City that was selling regular for $2.18 a gallon at about 2 p.m. New York time Friday, DeHaan said.
The first place to reach $2 gasoline will probably be somewhere in the U.S. Southeast where fuel taxes are low and stations have cheaper supplies flowing in from oil refineries along the Gulf Coast, said Ash. “We’re talking about limited markets in maybe South Carolina, Mississippi, Tennessee.”
At the Stripes gasoline station in Karnes City, Texas, a store that overlooks horse pastures and two drilling rigs in the Eagle Ford shale formation, gasoline was selling for $2.32 a gallon, down from $3.49 in the middle of summer. Joseph Bjorgaard, the store’s assistant general manager, drives his 2001 metallic blue Ford Expedition 90 miles to Corpus Christi every weekend for church and to visit friends.
“I was bumming couches from friends so I wouldn’t have to buy gas for the extra trip,” he said. “Prices drop a dollar and it doesn’t seem so bad anymore.”
The chances of gasoline prices averaging below $2 a gallon across the nation remain “highly unlikely,” Ash said. “You’re still looking at a national average at $2.75. To get to $2, you’d need to see crude prices drop another $25 to $30 a barrel.”
Oil futures in London and New York sank to the lowest in more than four years on OPEC’s inaction.
“The average driver may be shocked by how much gas prices drop before we see a low,” Green said. “It’s a remarkable time to be a driver.”