Gasoline prices are at multi-year lows, but no one is driving

A detailed view of a Shell gas station sign showing the low price of $1.69 per gallon, the result of the coronavirus (COVID-19) outbreak on March 31, 2020 in Jacksonville, Fl.

David Rosenblum | Icon Sportswire | Getty Images

With gas prices this low, Tracie Brocket would usually hit the open roads on the weekend around her home in Sweet Grass County, Montana. But she’s one of many Americans who can’t take advantage now of cheaper fuel, as the majority of the country stays home in an effort to slow the spread of the coronavirus. 

The national average for a gallon of gas — $1.883 as of Friday, according to the latest data from AAA — is the cheapest in more than four years. The coronavirus outbreak has sapped demand for both crude oil and gasoline, just as a price war between Saudi Arabia kicked off as each sought to gain market share in the global oil market. This has translated into dramatically cheaper prices at the pump. In the last month the national average per gallon has dropped 48 cents, and current prices are 32% below what consumers paid a year ago. 

With only guesswork as to when stay-at-home ordinances might be lifted, gas prices could have even further to fall.

“We are seeing major destruction to gasoline demand which could push the national average below $1.70 or cheaper this month,” AAA spokesperson Jeanette Casselano told CNBC.

And some believe it won’t stop there. Patrick DeHaan, head of petroleum analysis at GasBuddy.com, sees the national average dropping below 2016’s low of $1.66. Prices could get all the way down to $1.49, he said, depending on “how quickly the situation [coronavirus] improves — if it does at all.”

Brocket, a receptionist at All Creatures Veterinary Service in Big Timber, said she still drives between 25 miles and 35 miles per day to and from work, but finds it frustrating that she can’t benefit from gas that’s “a lot cheaper than usual” for activities outside of her job. The same holds true for millions in the current national lockdown.

Gasoline demand in “free fall”

Demand for gas is at its lowest level since 1968, according to Tom Kloza, head of global energy analysis at Oil Price Information Services.

Data from the Energy Information Administration shows that for the week ending April 3, gas usage fell 48% year-over-year, to 5.065 million barrels per day.

DeHaan said that the speed of the decline, which has essentially sent demand into “free fall” is “truly remarkable.”

“We’ve seen prices plummet consistent with something that we have almost never seen…By all metrics we really are in some unprecedented times for retail gasoline and certainly oil prices as well,” he added.

With at least 42 states under stay-at-home orders, Gigi McKelvey, who lives in Greenville, South Carolina, is just one of millions of Americans to drastically cut down on driving.

During normal times, McKelvey typically drives around 300 miles per week. “Now, I mean, I’ve literally driven four miles in three weeks,” she said. 

A small business owner with three kids aged 14, 13 and 8, she said she’s seen a “huge decrease” in gas prices. She recently filled her tank for $20. Usually, it costs between $38 and $40.

Not the same boon to the economy

President Donald Trump has cheered low gas prices, tweeting in March: “Good for the consumer, gasoline prices coming down!”

Cheaper fuel typically acts as a boon to the economy, since consumers have extra money in their pockets. But this time around, the areas where Americans would spend — dining out or going to the movies, for example, and driving to either —are not options.  

“The outbreak is causing a meaningful shift in the consumer basket and lower oil prices are unlikely to be the jet fuel for consumption that they would be in a more normal environment,” Bank of America said in a recent note to clients.

Chris Gales, a musician in Memphis who also drives for Uber Eats, said that the coronavirus has all but shut down the usually bustling city. “On a Friday or Saturday night where Beale Street [in downtown Memphis] will be jumping and booming, I mean it’s almost tumbleweeds rolling down the road,” he said.

Gales said he wished gas prices were perpetually this low. “It cuts into the bottom line of any industry. Music industry, us musicians trying to get to our shows, the Uber Eats industry trying to deliver food, and of course you know the bigger businesses.”

With extra disposable income Gales would typically pay down debt as well as save up for travelling. McKelvey said added income typically goes to extracurricular activities for her children.

Good for truckers

There is, however, one group that’s very much still hitting the road: truck drivers. Consumers are buying staples and packaged goods in record numbers, and the transportation industry is responding.

“Diesel consumption showed a surge in the month of March, as manufacturers rushed to get essential products to market,” Jenny Vander Zanden, chief operating officer at energy and supply chain management company Breakthrough, told CNBC in an email.

According to data from Breakthrough, which tracks roughly 60,000 freight movements daily, at the end of March transportation networks operated as much as 18% above the same period in 2019.

“Lower prices and increased freight volumes have allowed many manufacturers and retailers to capitalize on this low fuel price environment,” Vander Zanden added.

– CNBC’s Patti Domm, Michael Bloom and Nate Rattner contributed reporting.

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