According to 24/7 Wall St., gas prices may dip as low as 99 cents per gallon in the near future:
The International Energy Agency (IEA) February oil market report will put more downward pressure on crude prices just as the price of gasoline in some parts of the United States dips to above $1.10 a gallon. Prices are moving swiftly to below $1, a price last posted in the United States in December of 1993.
More than 50 stations in Oklahoma sell gas for under $1.15 per gallon. One station sells regular gas as $1.11, according to GasBuddy. That is against a national price for an average gallon of gas at $1.72. A month ago, that price was just short of $2.
24/7 Wall St. has done an analysis of gas taxes in all 50 states. What it shows is that the marriage of low oil prices and state taxes have created an environment that soon could drive gas prices below $1.
24/7 Wall St. based its data on findings reported by the International Energy Agency (IEA) regarding oil prices that continue to fall globally, and also a report by the American Automobile Association (AAA) that showed that domestic oil production is at record high levels for this time of year.
Gas prices vary based on state gas taxes and the proximity to oil refineries. State gas taxes range from as low as $0.12 (Alaska) per gallon to as high as $0.50 (Pennsylvania). The federal gas tax of $0.184 cents per gallon is uniform across all states.
While falling oil prices generally lead to falling gas prices, what has some economists worried is the fate of the oil industry. As of this writing, oil is priced at $27.45 per barrel, down from about $105 a barrel in mid-2014. Oil prices falling as low as they are now are obviously good for consumers, but bad for the oil industry.
Writing for Fortune a couple months ago, Mike Scott explained why oil prices are falling:
The Organization of Petroleum Exporting Countries (OPEC) at its latest meeting in Vienna at the start of December decided to keep oil production at its current levels despite the recent drop in oil prices. But the level of disagreement that seemed to come with that agreement among the powerful cartel members surprised even seasoned observers. The result, observers say, is that there is now no supply discipline at a time when global demand, particularly from China, appears to be dropping.
On top of that, sentiment was also hurt by the United Nations climate conference in Paris, which seemed to suggest to many that the world leaders were more committed than before to switch their economies away from oil and other fossil fuels.“Paris is not the world saying it wishes it weren’t trapped in an abusive relationship with the fossil fuel industry; Paris is the world’s economy serving divorce papers,” pointed out Michael Liebreich, chairman of Bloomberg New Energy Finance. “A key point has passed, an irreversible process has started.”
And while declaring the end of fossil fuels is likely extremely premature, that kind of rhetoric is spooking the market at a time when prices are vulnerable.
So, OPEC decided to keep supply high while demand is dropping. The price will continue to fall, and some “doomsday scenarios” put oil around $10 to $20 a barrel. Some speculate that oil will be so cheap that its price won’t even cover the cost to pump it.
If Big Oil does go bankrupt, at least we’ll be left with the government-subsidized green industry.