Gas prices below $2: Coming to a gas station near you

More than half of the 140,000 gas stations in the US now are selling gas for just under $2 a gallon. And gas that cheap will soon be coming to many consumers in the rest of the nation.

With oil prices dropping due to concerns about a second wave of the Covid-19 pandemic eating deeply into demand, gas prices are now down to levels nationwide not seen in more than four months, when the country was coming out of lockdowns and the economy was just restarting.

The last time that more than half the stations sold regular gas for less than $2 a gallon was June 18.

“This is all about demand,” said Tom Kloza, chief oil analyst with the Oil Price Information Service, which tracks prices for AAA and confirms the number of stations that are now below $2.

With millions of people out of work and millions more working from home and no longer commuting, gasoline consumption is well below year ago levels. It’s now in the 85% to 89% range, an improvement over the the 50% consumption in April during widespread stay-at-home orders.

The average gasoline price nationwide currently stands at $2.14, according to AAA. But that level overstates how expensive gasoline actually is, due to inflated prices at stations in high-cost states along the West Coast. (Gas cost $3.18 on average in California and $2.76 in Washington state.) The median price, which represents the point at which half the nation’s stations sell for more and half sell for less, edged down 2 cents to $1.999 as of Saturday.

In 20 states, mostly in in the center of the country and the Southeast, a majority of stations are below $2. And in nine of them — Alabama, Arkansas, Kansas, Louisiana, Mississippi, Missouri, South Carolina, Tennessee and Texas — at least 90% of stations are below that price. Even in most states where sub-$2 gas is not the norm, it can be found at a significant percentage of stations.

“I think most people will soon be paying between $1.75 and $2 a gallon. About 75% of stations nationwide will probably be below $2,” Kloza said.

Every state except Alaska, California, Hawaii, Nevada and Washington already have at least the occasional gasoline prices below $2 gallon.

The drop in gas prices is aided by seasonal factors, as gasoline prices typically fall in autumn. The summer driving season is well behind us, cutting consumption, and the cleaner, more expensive, blend of gasoline required during the summer to fight smog is no longer in use.

Something as predictable as the end of daylight savings time this weekend also cuts into driving and consumption, as many drivers prefer not to drive at night.

But the combination of low demand and low oil prices is causing prices to fall even further this year. A year ago the national average stood nearly 50 cents a gallon higher at $2.61.

And other factors that will affect gasoline demand and prices remain at play. These include social changes in behavior due to the pandemic, such as people not getting together with family for the holidays, or doing more holiday shopping online than at malls, Kloza said.

“The worst months for consumption every year are January and February,” he said. “But December could be a bad month, too.”