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As the coronavirus pandemic saps demand for oil throughout the United States, crude oil prices dropped 306 percent on Monday to -$37.63 per gallon, its lowest level since 1983, but don’t expect to see that at the pump.
“At this point, it doesn’t look like gasoline will be mirroring the unprecedented drop in the WTI crude oil May contract today,” Patrick DeHaan, Gasbuddy’s senior petroleum analyst, told FOX Business in an email.
While DeHaan doesn’t expect the drop to have any effect on retail gas prices, it doesn’t mean the national average won’t fall.
DeHaan told “The Claman Countdown” he could see the national average for regular gas, which is roughly $1.77 per gallon according to Gasbuddy, falling significantly over the next few weeks, taking out previous lows from 2016 and even 2000.
“We are likely, here in the next 10 days, to fall under previous 2016 lows, and as we continue to go down there’s a good possibility we’ll take out the 2000 low with the national average falling to $1.49 per gallon or more.” DeHaan said.
He attributes the drop in crude oil to a lack in demand since there is “basically no one to demand these barrels of oil” as many people have stopped commuting to work and have sheltered in place because of the pandemic.
Motorists wait for gasoline in Detroit, Friday, April 10, 2020. Gas prices are falling because commuters, vacationers and road trippers are doing none of those things due to the coronavirus. (AP Photo/Paul Sancya)
But DeHaan noted that the decline in demand is starting to slow down.
“We are seeing a slowdown now in the decline,” DeHaan said. “The decline had been really gaining momentum a few weeks ago but that has slowed.”
The reason for the slowdown is that gas station owners are wary of cutting their prices too rapidly to match the demand for crude, even though they might have the capacity to drop the cost per gallon. DeHaan believes convenience stores are holding back on lowering gas prices in order to “absorb the margin” as stations prepare for the worst.
The collapse in oil sent the markets tumbling during Monday’s trading session.
|I:DJI||DOW JONES AVERAGES||23650.44||-592.05||-2.44%|
|I:COMP||NASDAQ COMPOSITE INDEX||8560.728396||-89.41||-1.03%|
The Dow Jones Industrial Average fell over 592 points or 2.3 percent while the S&P 500 and Nasdaq Composite were down 1.79 percent and 1.03 percent, respectively.