Gas Prices Are Approaching $2

Gasoline prices are falling fast, driven by the coronavirus pandemic and a price war between Saudi Arabia and Russia.

That means savings for drivers, but benefits might be out-shadowed by the economic costs of both the viral outbreak and the collapse of crude prices.

According to AAA, gas prices hit a new low for the year at $2.30 on Friday, with the possibility that the coming weeks will see prices drop even further. That's remarkable, given that prices usually climb at this time of year.

"Should trends continue the way they are, there's a possibility we could see the national average hit $2 in the next coming weeks," says AAA spokeswoman Jeanette Casselano.

Prices vary by location; in Texas, the average is already under $2, while Washington, California and Hawaii are still over $3.

At a Gulf station near Alexandria, Va., most drivers were delighted with the price at the pump on Thursday: $1.81.

"I was shocked," said Vickie Robinson. "I can't believe it."

Gasoline prices dropped because crude oil prices have crashed recently. Demand declined as people around the world stay home to avoid spreading the coronavirus; then prices dropped further and supply spiked because of a price war between Saudi Arabia and Russia.

Those factors were weighing heavily on Mani Younas when he pulled in to the same pump as Robinson. He, too, couldn't believe the low gas prices, but he worried it was a bad sign for the U.S. economy.

"It can be 50-cent gas, but if you don't have money to fill up, what's the point?" he asked.

Cheap Saudi oil will destroy U.S. companies, he said. "It's not good for our economy."

It's true that the Saudi-Russia price war is hurting oil companies around the world, including in the U.S., which is the world's largest oil and natural gas producer.

Tom Kloza, an analyst with the Oil Price Information Service, says that while low gasoline prices save American drivers money, they cost American producers significantly more.

"I worked out some back-of-the-envelope math and I figured that maybe in March and April of this year, we'll save about $10 billion compared to what we paid in 2018," he said.

But if you add up what was lost by the oil and gas industry, as well as companies affected by oil and gas losses, in just the last week, "it is many, many times $10 billion," Kloza said.

Even AAA — which usually celebrates low gas prices — noted in its most recent update that while consumers are feeling a benefit now, "sustained cheap crude prices" could contribute to a recession.

Meanwhile, those low prices are a symptom of all the things that have slowed down or stopped because of this pandemic, as schools, factories and conferences have shut down. And that's bad news for all kinds of businesses and their employees.

If you've lost income, cheaper gas might be welcome. But if you're no longer commuting or traveling, it might be a moot point.

Wilson Garcia, at the gas station near Alexandria, was initially very happy with the cheap prices.

"Seeing it under $2 is amazing," he says. "I haven't seen it that low in a long time."

But he works at a hotel, and the travel and hospitality industry has been hit hard by the pandemic as people cancel travel plans. This week, his hours were cut from 40 to 24.

When he found out the pandemic also contributed to the low gas prices, he reassessed. The savings, he said, were "bittersweet." [Copyright 2020 NPR]