An abundance of winter-grade gasoline, coupled with a glut of crude oil, is creating the lowest gasoline prices in 12 years in the Midwest.
GasBuddy.com is reporting that nine states are seeing the lowest average gasoline prices per gallon since early 2004 — Oklahoma ($1.37), Indiana ($1.45), Kansas ($1.46), Ohio ($1.47), Michigan ($1.49), Minnesota ($1.52), Wisconsin ($1.54), Illinois ($1.57), and North Dakota ($1.63).
The average price in Iowa is $1.73 per gallon — three cents away from the lowest average price since 2005 — according to Patrick DeHaan, senior petroleum analyst at GasBuddy.com.
Four convenience stores in southwest Cedar Rapids on Tuesday afternoon were selling gas for $1.46 per gallon — Hawkeye Convenience at 2330 Wiley Blvd. SW, Murphy USA at 3030 Edgewood Rd. SW, BP at 2601 Williams Blvd. SW and Kum & Go at 2604 16th Ave. SW.
DeHaan said previously unthinkable 99-cent-per-gallon gasoline is becoming a strong possibility as wholesale gas prices plunge amid growing supply.
“The cheapest station in Indiana is only 18 cents away from 99 cents per gallon. Ohio is 20 cents away, Michigan is 20 cents away and Oklahoma is 10 cents away at $1.09 per gallon,” DeHaan said. “This oversupply of winter-blend gasoline is going to have to be liquidated, and there’s no better way to get rid of it than lower prices.”
Consumption tends to be lower during the winter months as motorists take fewer vacations. DeHaan said Midwest gasoline inventories are at record levels and are not likely to decline until the summer driving months.
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Crude oil prices collapsed over the past 18 months to below $30 a barrel from as high as $115 as OPEC boosted production to drive higher-cost producers such as U.S. shale companies out of the market.
The International Energy Agency on Tuesday said the world will store excess oil for most of 2016 as declines in U.S. output take time, and OPEC is unlikely to cut a deal with other producers to reduce output.
The agency, which coordinates energy policies of industrialized countries, said it does not believe oil prices will follow some of the most extreme forecasts and fall to as low as $10 per barrel.