WHAT AREAS ARE EXPERIENCING THE MOST DRAMATIC GAS PRICE DROPS AND WHY?
In every city, in every town, gas prices have been dropping across the country since mid-February because crude oil prices have plummeted along with gasoline demand, paving the way for much lower prices. However, some regions are seeing sharper declines than others…for now.
The top 25 states that saw the larger drops compared to a month ago:
Since the current situation is due to the price of crude oil and overall drop in demand, the assumption is that prices across the board would fall at similar rates. So, what gives?
IT’S A MARATHON, NOT A SPRINT
Think of the drop in gas prices as a marathon. We’ve been seeing the drop for weeks now, and some areas that have fallen faster than others are “ahead” in the “race”. Those areas will slow down eventually while the other higher price areas will soon play catch up. The finish line is going to be very similar for everyone, but some will get there before others.
IT’S COMPLICATED
There are various factors that go into determining gas prices: 1) price of crude oil, 2) individual state taxes, and 3) proximity of the gas station to supply sources, like refineries and pipelines. 4) perhaps the largest factor (and a very loaded word), competition.
Competition sounds simple but is the most complicated of these factors. How many stations are nearby, how much gasoline they sell (are you in a small town or large), average incomes, traffic counts, who the stations buy from, their strategy, are all different from one another. Some stations may drop prices faster to try and “steal” traffic from filling up at the competition, which could turn into a price war.
These factors are very uneven and that’s why Wautoma, Wis. shocked the nation last week becoming one of the first states to sell gasoline at 99c/gal and stay there. There’s not much rhyme or reason.
THE MIDWEST
Notice that all but two states in the top 10 spots are located in the Midwest. This region, specifically the Great Lakes, has the most gas stations with the most variety of brands. In fact every single midwestern state makes the top 25. The Great Lakes often sees prices move quickly in both directions, up and down, and is a bellwether for the rest of the nation’s stations and where they will be going. For whatever reason, stations in these states tend to be very competitive and fast to pass along price changes.
To further prove the point about competition, the states that saw the smallest declines are Utah, 17c; Hawaii, 21c; Idaho, 23c; Arizona, 25c; and Wyoming, 28c.
THE WEST COAST
Important to note that states along the West Coast or in New England are further away from supply sources, which slows down price fluctuation. Notice that most of the West and Northeast Region states are not on the list above.
The West Coast has a unique disadvantage that keeps prices higher typically, and making any big drops much longer to catch up. The disadvantage: The West Coast is isolated from the rest of the country when it comes to oil and refinery flow. If a refinery problem happens, there is no quick ability for refineries elsewhere to send them gasoline. Most of the rest of the country has that level of interconnectedness that prevents such high prices.
In addition, California has the nation’s most stringent gasoline requirements, gasoline taxes, and carbon emissions rules that lead to the nation’s highest prices.
THE GOOD NEWS
Even the West Coast will see prices fall, and perhaps more so than anyone else over the next 4-6 weeks.
https://www.gasbuddy.com/go/gas-price-drops-march-2020/