During a coronavirus epidemic that has disputed American life in so many ways and killed close to 40,000 people in the U.S. so far, it’s hard to find any bright spots — but one positive development is significantly lower gas costs.
Just as levels of alarm over COVID-19 have skyrocketed, an equally dramatic price drop has occurred in the global oil market which is showing up at the pump.
A check of stations in Mount Airy in recent days showed that most were selling regular unleaded in the range of $1.44 to $1.49 per gallon, although some lower prices were listed in a couple of cases.
This reflects a steady drop in fuel prices lately to the lowest point in many years, for obvious reasons. With much of the nation brought to a standstill by stay-at-home orders, business closures and other restrictions, the general public is not spending as much time behind the wheel.
The diminished travel means less demand for fuel, which has led to stockpiles building up and drastically cheaper prices for the gasoline sales that are made.
“I just think you have an overabundance of it at the present time and nowhere to put it,” said Horace P. Bondurant, the president of a local petroleum operation doing business as Mount Airy Oil and Gas Co.
This has resulted in oil tankers not making deliveries and languishing out in the ocean as shipping bottlenecks grow. Petroleum companies are motivated to leave untapped crude oil in the ground to avoid adding to a supply that is forcing retail sales at bargain-basement prices.
While the Mount Airy Oil and Gas operation now specializes in products such as propane, LP gas, fuel oil and kerosene, it also has included convenience store ownership, a segment the company began phasing out in recent years.
But as a longtime observer of local fuel trends involved in the business since 1983, Bondurant — who is also an accountant — has maintained a keen interest in market conditions. “I’m too old to quit,” said the company president, 73.
Where headed from here?
What consumers pay at the pump is rooted in the cost of crude oil on the world market, with Bondurant pointing out that one factor has involved a recent price war between Russia and Saudi Arabia.
One reference point during all this is a level of $20 per barrel which the market has settled around in recent weeks, accompanied by a belief among some observers that it probably wouldn’t get much lower, if any.
“But who knows?” Bondurant just before a plan for Russian and Saudi Arabia to cut production was approved earlier this month.
Yet this instead led to U.S. oil prices plunging significantly last Friday to an 18-year low of $18.27 a barrel. At one point, crude dropped to $17.33 a barrel — the weakest price since November 2001.
With the prevailing influence being the diminished demand for fuel by the motoring public, the sports betting pools normally devoted to basketball or hockey might now include a game of how low gas prices will go.
And again, similar to how there is a bottoming-out point for barrels of crude, Bondurant believes there’s a limit to how far costs can drop at the pump.
Certainly no one expects a return to 1969 gas prices that averaged about 35 cents per gallon.
In suggesting a threshold of $1.50 for regular unleaded, which some stations in Mount Airy have gone under, Bondurant believes getting too much below that will begin eating into profit margins in an unsustainable way.
Local businesses depend on a certain degree of profits from gasoline sales in order to pay employees and other operating costs, he said.
One prediction which can be depended on with certainty involves the fact that just as gravity dictates what goes up must come down, the equally strong force of supply and demand will make what has gone down go back up eventually.
Bondurant’s prediction is that the economy will begin rebounding in about three months, with gas consumption, and prices, responding accordingly.
“I think the price will go back up when there’s a demand for it,” he said.
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Source: https://www.mtairynews.com