Gas prices are reaching the lowest prices they have been in years and will probably continue to drop over the next few weeks. Last week in Morris and Hancock, prices dropped to $1.69 per gallon. In the metro area, some stations sold gas for under $1.00 per gallon. This is one of the biggest historical collapses in gas prices even during the Great Recession of 2008.
If prices dip to $1.49 by mid-April, as predicted, this would be the lowest since 2004. Hundreds of stations could be pushing prices to 99c for the first time since the early 2000s.
There are two big factors for the drop in prices according to Brian Kruize of Morris Co-op. Initially, prices started to drop when Russia and Saudi Arabia producers waged a crude oil price war. The price of crude oil then plummeted to $20 a barrel.
Then the COVID-19 crisis hit and people were ordered to stay at home. Kruize stated that suddenly there were no high school students driving to school, no college students heading home, no fans traveling to ball games and no salesmen on the road. Many non-essential workers were also staying home. Suddenly there was less gas sales and the supply went up.
‘Demand destruction’ is how Mark Holleman of Hancock Co-op termed it. There is a huge supply, which had already hit a low price, and a very small demand. He added that the drop in travel, including air travel, is bringing about a lower demand for fuel.
Both stations have noticed a big drop in sales so the prices are not going down as fast as in metro areas. The price is lowered when new loads come in which is not as often as before the crisis.
One positive thing the stations are looking at is the start of spring farm work. Farmers will see lower fuel prices and some are ordering barrels to fill for summer work. However, this will also help increase the demand and keep prices at level rates, at least until the ‘Stay at Home’ order is lifted.