Gas prices are listed as 1.499 for unleaded at a 7-11 gas station in Oklahoma City, Wednesday, March 18, 2020. Rising stockpiles and lowered demand are contributing to the low prices. (AP Photo/Sue Ogrocki)
OAN Newsroom
UPDATED 10:57 AM PT — Tuesday, March 31, 2020
The risk of a new global recession and the ongoing oil war between Saudi Arabia and Russia has produced an unexpected boost for the U.S. economy. Gas prices have plunged across the nation in recent weeks, following a 30 percent drop in international oil prices earlier this month.
Additionally, coronavirus-related shutdowns have dramatically reduced the demand for fuel, which has created an oversupply of oil and petroleum products worldwide.
“We are seeing the cheapest gas prices in the South and Southeast and the Midwest; those prices are as cheap as a $1.60 for some states and those are going to continue to drop,” said Jeanette Casselano, spokesperson for the American Automobile Association (AAA). “We usually see cheaper prices in the South and Southeast due to transportation costs and cheaper gas taxes.”
According to the Energy Information Administration, U.S. oil drillers produced 13 million barrels per day in the week ending on March-20. This allowed America to boost oil exports to more than 3.5 million barrels per day, but the U.S. still imports 9 million barrels each day to satisfy domestic demand.
This is happening not least due to isolation of some U.S. regions from the energy axis, which stretches between Texas and North Dakota.
“California gas prices are more likely to be affected by sort of tensions in the Middle East than maybe prices in Texas or elsewhere, because we are more reliant on that foreign oil,” explained Marie Montgomery, another spokesperson for AAA.
The state of California is still reliant on imported energy and its gas prices stand around $3 per gallon, which is about a dollar above the national average.
Part of the reason for this is the high gas taxes passed on to California drivers, but the main problem is the state’s ruling Democrats believe American-made petroleum is not good enough. As a result, almost 60 percent of California gas supply comes from foreign sources, mostly from Saudi Arabia and Latin America.
Meanwhile, experts have said low prices may hurt the American oil industry and drive many shale producers out of business.
A man fills up a gas tank at a Mobil gas station in Chicago, Wednesday, March 18, 2020. Gas prices going down as world makes changes to contain coronavirus. For most people, the new coronavirus causes only mild or moderate symptoms. For some it can cause more severe illness. (AP Photo/Nam Y. Huh)
The latest Russian-Saudi price war has brought back the memories of the 1987 “oil bust” that wiped out many American drillers back in the day. However, present day U.S. oil producers are more flexible and can stop as well as resume operation more quickly depending on the price.
Despite the risks, low fuel prices are expected to help American households get through coronavirus-related lockdowns that have left millions out of work.
Economists have said global oil prices are unlikely to recover anytime soon, while energy companies have said they have so much oil that they are running out of storage capacity. In this light, U.S. gas prices are now expected to drop another 25 cents a gallon in the coming weeks.
