By James Grob, email@example.com
Holiday travelers were able to save a lot of money at the pump during the past Christmas season, and since the first of the year prices have continued to drop.
The question now is, how long will it last?
Dan McTeague said he doesn’t know if prices per gallon in northern Iowa have hit rock bottom yet, but he expects it’s close.
“Best-case scenario, nothing happens, but there is evidence that prices could start to slowly but surely trickle up here in the Midwest,” McTeague said. “We’re good for another week or two, but watch out, because I sense we could see slow but appreciable, tiny baby steps back toward higher prices.”
McTeague is a senior petroleum analyst for GasBuddy, a company that tracks gas prices throughout the country. He has more than three decades of experience as an analyst in the petroleum industry.
McTeague said a price increase could come as early as this week in Iowa, and said there has been slight upward movement in prices in the Great Lakes states and Iowa’s neighboring states, such as Wisconsin and Illinois.
“If you’re seeing it at $1.90 to $1.95 per gallon, you might as well fill up,” he said. “The likelihood of it dropping a few pennies less per gallon is less than it going up.”
The price of gas was as low as $1.909 per gallon in the Charles City area last Thursday for regular unleaded gas with 10 percent ethanol, and a quick drive around town revealed no gas station above the $2 mark — most were around the $1.959 level. By Friday, the lowest price in town had dipped to $1.889, which is where it stood Saturday morning.
GasBuddy’s smartphone app/website (gasbuddy.com) lets consumers search for gas prices by city, state and zip code, with listings for most cities in the USA and Canada.
Missouri and Texas currently have the cheapest costs per gallon, according to McTeague, with average prices as low as $1.82 per gallon. Iowa has the 13th-lowest of the 50 states. State and federal gas taxes in Iowa are about 13 cents per gallon higher than what they are in Missouri.
“That almost explains the entire difference,” he said.
GasBuddy reported prices ranged from $1.81 per gallon to $1.95 per gallon in the Cedar Falls area last week. On Thursday, GasBuddy noted gasoline prices as low as $1.75 in Ankeny. By Saturday morning, the lowest price in the state of Iowa was in Altoona — $1.78 per gallon at the Flying J on Adventureland Drive. A Casey’s in Cedar Falls had the price at $1.79 per gallon on Saturday morning.
McTeague said rural areas tend to have higher prices than stations nearer to urban areas.
“The last time we saw prices in this vicinity of under $2 per gallon, you’d have to go back to March of 2017 — almost two years ago,” said McTeague, who added that many retailers in Iowa have shaved retail margins by 10-12 cents per gallon in recent weeks.
“The real reason this has dropped, however, has been the drop in the price of crude oil,” he said. “That’s 90 percent of the reason we’ve seen these decreases.”
McTeague said that just before Christmas Day crude oil dropped to $42 per barrel, and as of mid-week last week, the price had dropped from $33 to $30. The price of crude oil did inch back up by a little over $1 per barrel per day on both Thursday and Friday last week.
“When you see those kinds of devaluations in the main commodity, you know that the price per gallon is going to go down,” he said.
According to the annual report released last week by the American Automobile Association (AAA), the New Year ushered in the cheapest national gas price average in three years, and trends indicate that pump prices will likely remain cheap for at least the first half of this month. AAA reported that average prices in Iowa are 44 cents cheaper than they were a year ago.
McTeague said that in October, prices in Iowa were pushing $2.85 a gallon, nearly a dollar higher than they are now.
“This month we could see a halt in the drop and some turnaround,” he said. “In February we expect a price increase, but overall, it’s in March through May when we expect to see crude oil potentially going back to $65 per barrel — maybe even $70 — which will put us back to where we were in October.”
He said it was likely that will translate into prices hovering around $2.60 per gallon of gasoline come May, perhaps higher, as fuel companies will also be switching back to their summer blend, which leads to price increases. The national average could get back over $3 per gallon by then.
According to the AAA report, new concerns are growing of a potential economic slowdown in 2019 that could lead to a decline in global demand for crude.
“With OPEC production cuts slated to take effect this week, analysts will closely be watching the price of oil,” said Jeanette Casselano, AAA spokesperson. “Significant movement toward higher market prices would mean cheaper gas prices could be in the rearview mirror. However, AAA expects to see minimal volatility at the start of the cartel’s production cuts.”
McTeague warned that when summer comes, things could get more difficult for consumers.
“Summer is a different matter altogether,” he said. “We’re looking for more robust demand come summer. For most of the country, there is typically a spike in prices around Memorial Day, which kicks off the summer driving.”
McTeague said the nationwide average per gallon on Memorial Day last year was $2.77 — and prices stayed up near that level through the summer and into October.
He mentioned that there are other important factors looking ahead to next summer, and they are geopolitical. He said OPEC — the Organization of Petroleum-Exporting Countries — and other major oil-producing nations are expected to slow production in the spring, plus Iran’s waivers on exports are due to expire in May, and those waivers are not expected to be renewed.
“That will lead to higher oil prices,” McTeague said. “The reason crude oil prices dropped, more than any other issue, is that the president assured the world that he needed more oil and told OPEC and everyone else to produce more oil, because he was going to seal off Iran — and he didn’t, he gave waivers.”
One more geopolitical factor that could effect future gas prices at your local convenience store is trade deal negotiations with China — which have a deadline of March 1.
“Will there be a trade agreement with China, or will there be further escalation of tensions?” McTeague asked. “Tensions could lead to an overall global economic slowdown.”
In the meantime, McTeague advised consumers to shop around and look for ways to save on gas, because it can add up.
“Please protect yourself, and know that the spreads are pretty real. There are real savings to be had,” he said.