The Real Reason Why Gas Prices Are Plummeting

Unless you're in self-quarantine because of the novel coronavirus, or leading a lifestyle that doesn't require you to drive a whole lot, you might have noticed that gas prices are really, really low right now. According to Martin Baccardax of the Street, as of March 18, 2020, U.S. oil prices were the lowest they've been since the year 2002. It looks like the situation is going to last for a while, too. In fact, Baccardax tells us that the GasBuddy consumer advocate currently thinks that you should still be able to fill your tank with a very reasonable price of $2.03 per gallon in June 2020, which is a whopping $1.70 less than previous estimates. As of the prices right now, WBTV reported on March 18 that in some locations in North Carolina, a gallon of gas only costs $1.63. Savings!

It's probably safe to say that car owners aren't complaining, but what exactly is going on? What could be the real reason why gas prices are plummeting? It's ... it's the COVID-19 virus, right?   

Yeah, you guessed it: Gas is currently trending cheap because of the COVID-19 virus pandemic. Oil prices are falling because a whole bunch of airline travel has been restricted, and because China is currently using a lot less of the stuff. Analysts also expect that other major energy consumers will have similar "pullbacks" due to the ongoing situation. The pandemic is not the only culprit, though. As Camila Domonoske of NPR noted on March 13, there is also an ongoing price war between Russia and Saudi Arabia, which has led to the collapse of crude oil prices. 

So, there's a lot going on behind the cheap pump prices drivers enjoy at the moment. However, some of the more market-savvy customers have already recognized that the events currently driving prices low could have major impact in the future, and cheap influx of imported oil might well have dire consequences for US companies and economy. Oil Price Information Service analyst Tom Kloza points out that while the low gas prices may save American drivers billions of dollars, the losses by the oil and gas industry are "many, many times" that. Even the usually savings-happy AAA warns that "sustained cheap crude prices" might be a contributing factor to an impending recession. There's always a catch, isn't there?