The good news is gas prices are low. The bad news is it means the economy is less than robust, which is tied to the price of oil one way or another.
That’s according to Patrick DeHaan, head of petroleum analysis for GasBuddy.com, who realizes that saying such things may make him unpopular even if they’re true.
“Motorists shouldn’t rejoice too much, because what it means is the economy is maybe in more of a frail position than anticipated,” he said.
According to GasBuddy.com, the national average for a gallon of regular gasoline has plunged over the past two months, with motorists spending $205 million a day less for gas now compared to mid-October. By Christmas, the national average is projected to be $2.35, lower than last Christmas.
In Brownsville on Tuesday, a gallon of regular could be had for as little as $1.87. The absolute best price in Texas was $1.61 in San Marcos, while the state average was slightly over $2.00.
Of course cheaper fuel is good news for people who tend to spend a lot in general during the holidays, even if the factors pushing prices down — such as oversupply and dwindling demand — aren’t necessarily great.
Russia, for instance, despite recently agreeing to curb its oil production, so far has not followed through and continues to pump more than 11 million barrels a day, while Russia, the United States and Saudi Arabia combined are producing close to 33 million barrels a day, which is too much, DeHaan said.
Texas is the poster child for the shale revolution that’s put the United States on a path to once again being the world’s top oil producing nation, which helps insulate the country from geopolitical flare-ups elsewhere. The low oil prices that lead to low gas prices, though, can be both a cause and a symptom of a wobbly economy.
DeHaan noted that the price of oil has fallen from $76 in early October to “about $47 and change” on Tuesday. He thinks it’s mostly due to concerns over the economy and sluggish seasonal demand for oil.
DeHaan said the situation likely would be different if the United States hadn’t watered down sanctions against Iran, which went into effect Nov. 4, by issuing waivers to China, India and several other nations allowing to continue buying Iranian oil.
“That effectively negated what could have been upward pressure on the price of oil,” he said.
“There’s a connection between oil prices and economy,” DeHaan said. “There’s been no shortage of worries: economic growth, the trade battle with China. All of that is factored into the price of oil. … As goes the economy, goes gas prices.”
It could all change in an instant if trade tensions died down between the United States and China, whose economies fit together like pieces of a jigsaw puzzle, he said. Such a scenario could jolt oil prices right back to normal, DeHaan said.
“I mean, we’re talking about the world’s two largest economies,” he said.
Barring any such development, however, for the short term motorists can expect gas prices to stay low — at least until February, when seasonal factors take over, DeHaan said. That’s when refineries shut down for maintenance and begin the switch over to cleaner burning, more expensive summer fuel blends. Combined, these factors cause “pinch points” in supply that push the price at the pump higher, he said.
DeHaan counsels those hitting the road for the holidays to shop around for the best price per gallon and bear in mind that — as every seasoned driver knows — prices can range dramatically from station to station.
“Some stations are cutting prices far faster than others,” he said. “Some stations don’t always pass along the savings right away.”