Here’s some really good news for America’s drivers or almost all Americans: $2 a gallon gasoline prices are imminent in the United States. Bloomberg is predicting that drivers in some parts of the country will be paying $2 gallon or less by Christmas day.
Not every driver will see those prices, because anybody that drives across the country knows gas prices vary widely from state to state. Gas prices also vary widely within states; in Colorado, gas is 30¢ to 40¢ a gallon more expensive in the Central Rockies than it is in the Denver region just 60 miles away.
Some people could enjoy even cheaper gas; Patrick DeHaan, a petroleum analyst at GasBuddy Organization Inc., is predicting that $1.99 gas will appear at some stations within a few weeks. The lowest prices will be the South and Midwestern states, like Iowa, which historically have had extremely low gas prices.
It should also be noted here that many people take advantage of discount schemes like the membership cards given out by the Kroger Co. (NYSE: KR) supermarkets. Kroger’s Colorado subsidiary King Soopers gives shoppers 10¢ a gallon off on gas for each $100 worth of groceries they buy.
$1.80 a Gallon Gas Coming Soon
Some large retailers, including Kroger, Costco Wholesale (NASDAQ: COST), Wal-Mart Stores Inc. (NYSE: WMT), Sam’s Club, and Safeway Stores Inc., also use gasoline as a loss leader. With Wal-Mart and Safeway both losing market share to Costco and Kroger, we’re likely to see steep gasoline discounting to attract customers. It could affect the whole market because Kroger is now the United States’ third largest operator of filling stations. That means we’re likely to see gas at $1.80 a gallon in some areas of the country very soon.
Oddly enough, Americans have an old foe to thank for this situation: the Organization of Petroleum Exporting Countries, or OPEC. OPEC’s members voted not to cut oil production at their last meeting on Nov. 27, 2014. The major reason for this was that OPEC’s biggest oil producer, Saudi Arabia, twisted the other members’ arms not to lower production.
It is not clear why the Saudis did this but they might be reluctant to offend the American people with the ISIS terrorist army on the rampage in the Middle East. The Saudis like the idea of being able to call the White House for military help. It looks like cheap oil is here to stay.
Good news for drivers, bad news perhaps for companies like electric car maker Tesla and Toyota, which is planning to bring out its fuel cell powered car real soon. It’ll also be real good news for the economy because Americans will have more to spend on things like food and housing.
One has to wonder how low oil prices and gasoline prices can go. What will happen if gasoline falls to $1.50 a gallon or lower? That could boost the economy, but it will also hurt a lot of people, including those with oil company stock, oil industry workers, and Tesla stock holders. Expect to see a lot of economic chaos because of cheap gas.