How low can it go?
With gasoline demand in collapse, the world fuel market in turmoil, and forecasts becoming more dire that producers are running out of storage capacity, gasoline prices keep heading lower, like legendary limbo dancer Julia Edwards. Time after time: Lower that bar.
In Florida the price at the pump averaged $1.78 Sunday evening, according to AAA — The Auto Club Group. That’s more than 3 cents per gallon lower than the previous week, and nearly $1 per gallon cheaper than a year ago.
“Gas prices face continued downward pressure from extremely low demand, as residents are urged to stay home to stop the spread of coronavirus,” Mark Jenkins, spokesman, AAA — The Auto Club Group, stated in a news release. “The low demand has made it less profitable to pump oil and convert it to gasoline and jet fuel. Refiners are now having to make difficult decisions to either reduce output or close plants in attempt to lower gasoline supplies to match demand.”
State officials say gasoline demand is down as much as 70 percent in some of the larger Florida metro areas, AAA reported.
Around Florida Sunday evening, the cheapest gas was found in Jacksonville, at 1.62 per gallon; Punta Gorda, $1.65; Panama City, $1.65.
The most expensive gas was found in West Palm Beach-Boca Raton, $1.95 per gallon; Gainesville, $1.94; Fort Lauderdale, $1.90. It was the first time in memory gas was selling for less than $2 per gallon throughout Florida.
Energy experts believe rebalancing has begun, but it could take 4-8 weeks before the bottom is hit in pricing, AAA reported.
Refineries are making adjustments. During the past two months, U.S. refinery capacity has reduced from nearly 90 percent down to 68 percent, according to AAA. Gasoline production out of the Gulf Coast is nearly 30 percent lower than this time last year.
The oversupply issues for gasoline are similar to the issues with the global supply of crude. Last week, the price of crude collapsed by more than 300 percent, with prices dipping well into the negative. The record lows were brought on by concerns that the United States will soon run out storage for excess supplies. Energy experts believe global crude storage will reach capacity within the next 3-4 weeks, unless output is dramatically reduced, AAA reported.
By Friday, crude oil futures returned to $16 per barrel.
The upswing was brought on by a new contract month, another U.S. stimulus package, and demand recovery in China.
Renewed tensions between the United States and Iran, also led to upward movement in crude oil prices. Last week, President Donald Trump ordered the U.S. Navy to shoot any Iranian ships that harass it in the Persian Gulf.