BOSTON, Feb. 8, 2016 – Another week, another decline at the gas pump for much of the country. Gasoline prices fell 6.2 cents in the last week, according to GasBuddy.com live data. Prices Monday morning stood at $1.733 a gallon, some 25.6 cents lower than a month ago, and 44.4 cents under a year ago as crude oil prices struggle to rebound from recent lows.
Nowhere in the country has the decline been as large as in the Midwest, where refiners, incentivized by running cheaper Canadian varieties of crude oil, have continued to churn out cheap winter gasoline. EIA numbers now show gasoline inventories across the country at their highest January (the latest information available) level ever, while the Midwest sees some of the highest outright supply levels in over a decade. The situation has caused some prices in the Great Lakes to fall to levels not seen in nearly a decade.
In just the last week, average prices in Indiana, Michigan and Ohio fell 14 cents per gallon, while some stations in these states fell over 30 cents per gallon. Kansas saw a 10 cent decline, while Illinois and Minnesota fell 9.1 cents and Oklahoma 8.3 cents. Just two states saw a lift in prices in the last week: Delaware rose 1.5 cents while Hawaii saw prices advance 1.2 cents.
Over half the states in the country have seen gas prices decline over 20 cents in the last month, while the Great Lakes and West Coast sit atop the list: Indiana, Illinois, Ohio and Michigan saw declines of 41-43 cents, while California, Oregon and Washington saw declines of 36-37 cents.
Nationwide, just 13.1% of gas stations are selling over $2 per gallon while over 25% now are selling under $1.50 per gallon. Diesel prices are joining in on gasoline’s low-price party and stand at $2.019 a gallon, likely to decline under $2 in just a matter of days.
The continued decline in gasoline and diesel prices comes as crude oil prices struggle and concerns of worldwide recession increase. Weakness in China is sapping demand from the world’s second largest oil consumer precisely at the same time Iran is ramping up oil exports and Saudi Arabia leverages market share, a trifecta for cheap gas loving motorists. As gasoline supply continues to easily outpace demand, a growing threat looms: winter spec gasoline’s death is on the horizon as EPA-mandated cleaner blends of gasoline begin to be phased in. This could lead to a fire sale of gasoline at the nation’s fuel racks as refiners must purge this gasoline before pipeline requirements shift.
“Gasoline prices continue to plunge coast to coast as refiners continue to churn out winter-spec gasoline that will soon need to be purged,” said Patrick DeHaan, GasBuddy senior petroleum analyst. “While crude oil prices have held above recent lows, gasoline fundamentals continue to be remarkably weak as refiners continue to churn out winter-spec gasoline, incentivized by cheap crude oil. This has put retail gasoline prices under tremendous pressure as gasoline inventories rise to their highest January level since records started in 1990. Refiners will continue selling any winter spec gasoline at bargain basement prices to rid themselves of it before specifications change heading into summer. In the days ahead, expect this seasonal “clearance sale” of gasoline to continue, leading to lower prices in most areas. But,” DeHaan said, “don’t get too relaxed- the shift in specifications will lead to an eventual lift in prices once winter gasoline is gone.”