Prices at the gasoline pump have fallen sharply in Iowa since Russia and Saudi Arabia launched a crude oil price war and a potential drop in consumer demand due to concerns over the coronavirus.
Unleaded regular gasoline with 10 percent ethanol is selling for $1.58 a gallon at Casey’s, Murphy Oil (Walmart) and Kwik Star on the east edge of Marion and an average of $1.69 a gallon at Casey’s, Fleet Farm, Kwik Star and Murphy Oil in Cedar Rapids.
In Coralville and Iowa City, the same gasoline blend is selling for an average of $2.05 a gallon.
The average statewide price for regular unleaded is $2 a gallon, according to Mark Peterson, public affairs specialist for AAA Minnesota/Iowa.
“We have two things going on right now — flooding of the world oil market by the Saudis and an anticipated collapse in demand for gasoline,” Iowa State University economist Dave Swenson said. “Just about two weeks ago, Saudi Arabia got into an oil war with Russia. The Saudis are playing chicken with the rest of the oil producers in the world.
“They can produce oil for as low as $15 a barrel. Nobody else can produce oil at that price and still make a profit.
“They are trying to drive out of business or constrain production of any other oil producer, including frackers in the United States. It also will include Iraq, Iran and especially the Russians.”
Swenson said the ultimate goal is to slash world oil production to the point that Saudi Arabia can get the price it wants for a barrel of oil. Crude oil prices are significantly lower, down about 60.7 percent compared to a year ago.
Swenson said it is too early to see the full impact of the COVID-19 outbreak on gasoline prices.
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“If we have people actively not just social distancing, but moving more toward quarantine and staying in place, that is going to mean a lot less demand for fuel,” he said. “The average consumer is going to drive a lot less over the next two to three months because of the response to the coronavirus.”
As far as what will happen with gasoline prices when the price of oil stabilizes and rises, Swenson does not expect a sharp jump in the near term.
“The prices are not going to come up rapidly,” he said. “The prices are going to come up slowly as producers adjust their production.
“You can expect gasoline prices not to get to where they were before this drop until at least the end of the year.”