As of Thursday, the average gas price in Kansas stood as the fifth lowest in the nation at $1.99. This marks the first time in over five and a half years that the price was below $2, said Jim Hanni, Topeka-based AAA spokesman.
Average gas prices in two states – Missouri ($1.92) and Oklahoma ($1.98) – have also dropped below $2 per gallon for the first time since 2009. Kansas was third, but “Ohio and Indiana slipped in front of us,” Hanni said.
The Kansas average has fallen 65 days in a row going back to Oct. 29, for a total of nearly a $1 cents in consecutive daily declines, and prices have plummeted $1.53 (nearly 43 percent) since the peak Kansas 2014 price on June 26. Kansans are saving 14 cents from a week ago, 60 cents from a month ago and $1.08 compared to one year ago today (35 percent less).
The lowest price in Kansas was in Wichita at $1.74, kansasgasprices.com reported. The high was reported at Coldwater at $3.59, and there were several in southwest Kansas over $2.40.
In Great Bend, the price was $2.10. Around the area, prices were $1.92 at Sterling, Chase and Lyons, $2.10 at Larned, and $1.99 at LaCrosse.
“This is going to continue,” Hanni said of the tumbling prices. “There’s no sign of it ending. It should last well into the new year.”
The national average price for regular unleaded gasoline is $2.25 per gallon, and motorists are saving 15 cents per gallon compared to one week ago, 53 cents compared to one month ago and $1.06 per gallon compared to this same date last year. AAA estimates that drivers are saving more than $500 million per day each day compared to the highs in both the spring and summer.
The average price at the pump is below $2.50 per gallon in more than two-thirds of all states (38). Drivers in the Midwest continue to pay the lowest averages in the nation, while the most expensive prices in the continental United States are in the Northeast continue to pay the highest averages in the continental U.S., led by New York ($2.81), Vermont ($2.74) and Connecticut ($2.69). Hawaii ($3.53) and Alaska ($3.09) remain the nation’s most expensive markets for retail gasoline and are also the only two states with averages above $3.00 per gallon.
What’s the reason for the fall?
“There are so many factors” causing the drop, Hanni said. There is a global over supply and over production.
The Organization of the Petroleum Exporting Countries, Saudi Arabia in particular, refuses to scale back production, playing what amounts to a game of chicken with the United States, Hanni said.
Historically, its costs more to pump oil in the U.S. So, the OPEC nations may think they can outlast the U.S. which will be forced to blink first.
The global oil market remains in a state of perceived oversupply due to record production from the United States combined with lower than expected global demand. Despite falling crude prices, Saudi Arabia, OPEC’s largest exporter of petroleum, has reiterated the cartel’s intention to maintain current production levels and allow the market to self-correct.
The lower demand is driven in part by more fuel-efficient vehicles. And, there are higher government mandated mileage standards around the corner.
This move could put pressure on production with higher cost production areas, such as the United States, facing a market where low prices make production unprofitable, Hanni said. The ripple effects of prolonged low oil prices could also pose a challenge to countries whose economic stability is dependent on revenue from oil production.
“It’s good for the consumer for sure,” Hanni said. But, it may cause hardships for the petroleum industry.
As has been the case in recent years in Egypt, Libya and Iran, this sort of geopolitical unrest can impact global supply and pressure oil prices higher on the threat of a disruption.
“The impact of instability in oil producing nations was on display this week, as crude prices posted gains to begin the morning following the escalation of violence in the Libyan port of Misurata,” he said. A fire caused by Libyan rebels is reported to have destroyed approximately two days of output from this OPEC-member country, and an additional six-million barrels stored at the port are also in jeopardy.
“This follows recent reports that Libyan production of crude oil has dropped by half over the last month due to fighting,” he said. Market watchers will continue to monitor the situation to ensure that production is not further impacted and violence does not spread to neighboring countries.
On Friday, at the close of formal trading, WTI closed down $1.11 per barrel at $54.73 per barrel on the NYMEX.