The latest data from the U.S. Energy Information Administration showed that the average cost for Regular gasoline in America fell by three cents over the past week to $2.51 per gallon. That was the third weekly decline in a row and the lowest reading since March of last year. Regionally, the cheapest gas in the country as of this writing can be found in Texas, where a gallon of Regular costs just $2.15 on average, while residents of California as usual have to pay the most in the continental U.S. for Regular ($3.55/gallon). A major factor behind the recent decline at the pump has been a drop in the price of crude oil caused in part by expectations for softer demand.
Indeed, the cost for a barrel of West Texas Intermediate crude this month has fallen to the lowest level since October as concerns about further military conflicts in the Middle East have already faded and the market’s attention has instead shifted to the new coronavirus originating in China. This latest epidemic is still in a relatively early stage, so the ultimate severity remains to be determined, but the general consensus is that the outbreak could drag on consumption, e.g. cancelled flights and less overall commuting. A more prolonged and wider-scale pandemic could keep oil prices lower for longer and also put a dent in the global reflation trade many investors were hoping would gain momentum this year. Such setbacks, though, could be transitory because if prior outbreaks are a guide any lost economic activity is often quickly recouped after the contagion has peaked and the general fear weighing on consumer and business behavior subsides.
Sources: U.S. EIA, GasBuddy, Reuters, FRBSL