How much did you say?
The national average for a gallon of gas is below $2 for the first time since 2009. Some regions of the United States could see the return of $1- a- gallon. How much did you say? Yes, that’s one dollar per gallon. Texas is an area that might see an additional drop in fuel prices; they have lower taxes and easy access to refineries. (Sorry California, you aren’t in the running.) The Great Lakes and the midwest region will almost certainly see lower fuel prices because there is a glut of gasoline in the area. Gas stations in the Great Lakes region have always priced fuel competitively in an effort to drive traffic into their convenience stores. It seems unfathomable, but consider this: we are paying on average $1.50 a gallon for gas, but running into the retail store for a $4 gallon of milk. This is just conjecture but one would think it is easier to milk a cow than drill for oil. Clearly, the pricing formula must relate to that Econ 101 chapter on supply and demand.
According to the Wall Street Journal, refineries in the U.S., Saudi Arabia, Russia and Iran have been at nearly full production which has created excess supply. (Needless to say, here at STORD we wish we could STORD the excess capacity, but that unique capability is not in our wheelhouse.) Currently, the U.S. has 254 million gallons stockpiled which has caused the futures market to trade under $1 for the first time since 2008. Basically, this means that some people are betting that the price of a barrel of crude oil will continue to drop.
What does that mean for you and me? Spring break is on the horizon and logistical plans for summer are already being made. The price of gas factors into most families budget. Be glad. According to AAA, 25% of all gas stations in the U.S. already have gas priced under $1.50. The last time gas prices averaged $1 per gallon was 1999. (Factoid: The song, 1999, by the artist formerly known as Prince, was released in 1982.) No one is predicting that gas prices will continue to drop indefinitely. Economist watch this indicator daily — if not hourly because the indicator is global.
The airline industry is finally passing a portion of their fuel savings onto customers. Up until recently, most major carriers have kept profits from fuel savings to themselves. According to Business Insider, United Airlines’ recorded the highest profit in company history, $1.2 billion in the second quarter of 2015. Other major carriers are seeing record profits, while most low cost carriers are using this opportunity to attract new customers by offering fares significantly lower than the major carriers.
No matter how you choose to travel, lower fuel costs should have an impact on your bottom line. Maybe your spouse will surprise you with a impressive excess balance in your bank account– kinda like the airlines, but not as much. You can exclaim: How much did you say?