Ryan Blackwell could not believe the marquee Wednesday outside MotoMart on West Main Street.
“It’s $1.88!,” the 45-year Belleville resident said. “That is low. I’ve only got 5 bucks. I like that.”
Down the road, Circle K was selling regular unleaded fuel for almost a dime cheaper — @1.79 a gallon — leaving some metro-east consumers wondering how this can be.
“The way the economy is right now, it’s amazing how it’s so low,” said Delain Wilbourn, 21, of Belleville. “You’d think it would be high right now due to the things that’s happening in the Middle East.”
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Some point to the instability in the oil-producing region caused by ISIS, while others say it’s America’s efforts at producing more domestic oil and self-sufficiency. Either way, gas is the cheapest it’s been in years, and many welcome the extra money in their pockets right before the holidays.
AAA-St. Louis spokesman Mike Right said crude oil prices, which influence wholesale prices that gas stations pay, remain around $40 a barrel. Not long ago, it was well over $100 a barrel. Also, supply is high, so high that a number of oil refineries have shut down for seasonal maintenance.
We’re talking about prices we have not seen in a long time. Wholesale prices (the price that retail gas stations pay) have been down to $1.21.
Mike Right, AAA spokesman in St. Louis
“We’re talking about prices we have not seen in a long time,” Right said. “Wholesale price (the price that retail gas stations pay) have been down to $1.21. We’re showing an average price today (in the metro-east) at $1.98.”
More than two dozen stations were selling unleaded gasoline for $1.79 a gallon or less on Wednesday, according to GasBuddy.com.
In Missouri, where gas traditionally is cheaper due to that state’s lower gasoline taxes, unleaded fuel is selling for as low as $151, a gallon.
Right said the region briefly witnessed sub-$2-gallon average gas prices in January, but the area has not seen average prices reach $1.79 since February 2009.
Declining prices at the pump are outpacing the ongoing maintenance at refineries throughout the Midwest, said Patrick DeHaan, senior petroleum analyst for online gas price tracker GasBuddy.com. He said crude oil prices remain relatively low, having dropped to as low as $38 a barrel in August before jumping back to $49 a barrel and currently settling around $40 a barrel.
As a result, inventories are high. DeHaan said the world’s oil inventories are 100 million barrels higher, 27 percent, than last year.
“There had been an extensive amount of refinery maintenance in the Great Lakes region this autumn,” DeHaan said. “Usually refiners are out conducting maintenance in the spring and autumn after the driving season, as their tired, old refineries need some sort of replenishment.”
Oil fell to near three-month lows and U.S. crude futures slipped to below $40 a barrel before settling higher on Wednesday at $40.70 as short-covering lifted a market initially suppressed by worries about a global supply glut, according to Reuters and CNBC.
U.S. crude inventories grew by 252,000 barrels last week, according to data from the Energy Information Administration (EIA) that came in below a 2 million-barrel build forecast by analysts in a Reuters poll.
$40 price per barrel for U.S. crude futures, at a three-month low
According to moneymorning.com, there is an oil supply glut on the international market. Usually, when oil prices fall, OPEC cuts its own production.
But the oil cartel, which is made up of some of the world's most major suppliers — led by Saudi Arabia — has not been cutting production. This puts too much oil on the international market. And one consequence of an oil glut is the lower gas prices consumers now are seeing at the pump.
Earlier this week, the Associated Press reported that a poll showed more people planned to travel 50 miles or more this Thanksgiving holiday, in part because of lower gasoline prices.
DeHaan also said the belief that gas stations increase fuel prices just before the Thanksgiving holiday is a myth. He said there are greater market forces at play.
“If the market rallies, it’s not going to be because of the holidays,” he said. “It will be because there was a sell off and wholesalers wanted to fill up and bought 25,000 or 50,000 barrels.”
Consumers’ attitudes also fuel business at gas stations. National Association of Convenience Stores spokesman Jeff Lenard said about 4 percent of the nation’s gross domestic product, or GDP, comes from convenience stores, and that consumers mostly react to the giant marquees that post daily gas prices. He said there is a direct correlation between gas prices and consumer sentiment.
“If gas goes up or down, by even a penny, you can see consumer sentiment adjust and they will shop accordingly,” Lenard said. “It doesn’t take much. It’s part of your psyche, when you drive to work and see prices lower than average, it’s like listening to commercial-free radio and your favorite song. You feel good and you feel happy.
“The opposite happens when prices rise. You can’t help but notice them. It just feels like a drum beat of pain and you just don’t feel good. It doesn’t matter if goes from $3 to $3.05 or from $2 to $2.05, the pain is almost the same. It’s that something negative is happening to you and you have no control over it. Prices falling has the opposite happen. You feel particularly good,” he said.
If gas goes up or down, by even a penny, you can see consumer sentiment adjust and they will shop accordingly. ... You feel good and you feel happy.
Jeff Lenard, National Association of Convenience Stores
Earlier this year, analysts predicted that gas prices at the retail level would hit $2 a gallon by the end of the year. They’re well ahead of that pace.
DeHaan anticipates gas prices will continue to fall through Thanksgiving and remain at or below $2 a gallon through the end of the year.
Right wonders about the immediate future, though, after the recent terrorism attacks in Paris and their short-term impact on fuel costs.
“Supplies are strong and we’ve got now major refinery issues, but I’m a little concerned about the terror situation and what impact it will have in the short term,” Right said. “It looks like it has caused some price pressure already. How long that will last or how severe that will be, no one knows at this point. Given what has gone on in the last of couple of days, we will see some moderation in prices upward, but modest increases, not necessarily due to the fact we have the holidays coming up.”
Back at MotoMart, Delain Wilbourn was not planning on filling up his tank Wednesday morning, but changed his mind after seeing the price.
“I was just coming in, in my little daily routine, to get my breakfast, and I saw it was $1.88 and I thought I might as well get some gas to take advantage of the price,” Wilbourn said. “I’m going to start coming here more often.”
Who’s selling gas below $1.80? (as of Wednesday)
$1.77 Shop N Save @ 2122 Troy Road in Edwardsville
$1.77 BP @ 301 S. Buchanan St. in Edwardsville
$1.77 BP 415 N. Main St. in Edwardsville
$1.78 Sam’s Club @ 1350 W. U.S. Highway 50 in O’Fallon
$1.78 MotoMart @ 1 Club Centre in Edwardsville
$1.78 QuikTrip @ 2490 Troy Road in Edwardsville
$1.79 Shop N Save @ 4201 North Belt West in Belleville
$1.79 Shell @ 2709 W. Main St. in Belleville
$1.79 Phillips 66 @ 6601 W. Main St. in Belleville
$1.79 ZX @ 2200 Vandalia St. in Collinsville
$1.79 Circle K @ 2233 Vandalia St. in Collinsville
$1.79 BP @ 1000 Beltline Road in Collinsville
$1.79 MotoMart @ 731 N. Bluff Road in Collinsville
$1.79 Casey’s @ 70 W. Main St. in Glen Carbon
$1.79 Phillips 66 @ 8065 Illinois 143 in Edwardsville
$1.79 Shell @ 629 W. Schwarz St. in Edwardsville
$1.79 Phillips 66 @ 980 E. Ferguson Ave. in Wood River
$1.79 ZX @ 900 E. Edwardsville Road in Wood River
$1.79 Casey’s @ 400 Broadway Ave. in South Roxana
$1.79 Conoco @ 4001 S. Illinois 159 in Glen Carbon
$1.79 Casey’s @ 900 Old St. Louis Road in Hartford
$1.79 MotoMart @ 702 Vandalia St. in Collinsville
$1.79 QuikTrip @ 605 W. Bethalto Road in Bethalto
$1.79 Casey’s @ 5256 Illinois 140 in Bethalto
$1.79 ZX @ 515 N. Bellwood Road in Bethalto
$1.79 Road Ranger @ 101 Piasa Lane in Hartford
$1.79 Casey’s @ 331 E. Edwardsville Road in Wood River
$1.79 Shop N Save @ 1904 E. Edwardsville Road in Wood River