Area gas prices falling sharply
The Daily Progress
Posted on Aug 3, 2015
Anyone planning a late-summer road trip with serious mileage might be in luck — gas prices in Virginia and throughout the country are declining to some of the low levels that were seen at the beginning of the year and in 2009.
This time, however, the falling prices — nearing $2 per gallon — are not the sign of an impending financial crisis, as the overall economy is faring better than it did during the Great Recession.
Analysts attribute the plunge of gas prices nationwide to the declining price of oil, which had started to slide drastically last year, going from $107 a barrel last summer to as low as $43.46 in March.
The decline in gas prices this summer, however, has been fairly acute, as the price for a barrel of oil dropped by approximately 20 percent in July to similar lows vendors dealt with over the spring. Since early last week, oil was being traded for less than $50. The peak price of oil for the year, $61.43 a barrel, was reached June 10.
“This could mean people saving more money that can be used to go out to restaurants or see a movie,” said AAA Mid-Atlantic spokeswoman Tammy Arnette. “As people usually go on vacation around this time of year, it also means people might make longer trips.”
There’s a variety of reasons why oil prices are down, but the main reason is the glut of oil reserves the U.S. holds, Arnette said.
“There’s been so much production that’s put downward pressure on the market,” she said.
Arnette also mentioned the recent nuclear deal with Iran is likely to increase supply globally, as Iran has been sitting on large oil reserves for several years due to trade sanctions.
Across Virginia’s metropolitan areas, most gas prices are rapidly slipping beneath $2.50 per gallon. On Monday, the average price for a gallon of self-service regular gas in Charlottesville was reported to be $2.38, a drop of 8 cents from last week, according to the AAA Daily Fuel Gauge Report.
In August 2014, the national average was at about $3.50 per gallon and $3.21 in Charlottesville. Since then, the national average has dropped by about 85 cents to $2.65 per gallon.
People planning a driving trip for the holiday season might have even better luck than motorists traveling this summer, as prices could sink below $2 a gallon, according to analysts.
GasBuddy.com senior petroleum analyst Patrick DeHann said Virginia’s gas prices historically have been lower than the rest of the country and neighboring states because of the relatively low gas taxes passed on to wholesale fuel sales.
“The big difference in gas prices is in the regions — for example, the Atlantic, the Gulf and West Coast,” DeHann said.
“The prices within these regions should be about the same, but those price differences are found in the taxes,” he said, using the roughly 30-cent price discrepancy between Virginia and Pennsylvania as an example.
But even with a bump in the state gas tax this year from 3.5 percent to 5.1 percent per gallon in wholesale transactions, prices in Virginia are still expected to be some of the lowest nationally.
Despite national news reports of increased sales of SUVs and pickup trucks, the Virginia Automobile Dealers Association does not expect lower gas prices to cause an increase in Virginia auto sales overall.
“People know that gas prices are cyclical,” said association spokesman Tucker Bloom, adding that sales are still expected to be positive, but not as good as when the recession ended initially and consumer confidence returned, increasing demand.
The real estate market could get a boost from the lower gas prices, however, according to Bennie Waller, a professor of finance and real estate at Longwood University.
By reviewing real estate data from 1999 to 2009, Waller and other researchers found a correlation for quicker closings on real estate listings when gas prices were low.
“There are multiple reasons for our conclusions,” Waller said, “People have more disposable income and consumer sentiment is better, but ultimately, real estate agents were inclined to show multiple properties to more people more often.”
Barring an environmental or manmade emergency that would severely hamper oil production or refinement, prices are expected to steadily continue dropping off even if demand for gas spikes, Arnette said.