(NEW YORK) — The novel coronavirus outbreak and disagreements between the Organization of the Petroleum Exporting Countries have caused global oil prices to plummet Monday, and experts say this could mean U.S. consumers are likely to see much lower prices at the gas pump.
The COVID-19 outbreak has been driving oil prices down for weeks as it has stunted economic activity in China, the epicenter of the outbreak and the world’s second-largest oil consumer. Over the weekend, OPEC members met to discuss how to deal with falling oil prices. Talks disintegrated, however, and Saudi Arabia ended up slashing its oil prices, triggering a price war and sending U.S. crude oil prices plunging by more than 25%.
Prices for the American benchmark, West Texas Intermediate crude oil, dipped below $30 per barrel on Sunday for the first time since 2016.
“Everyone, I think, is a little bit shocked at the tactics that have come out of the broken-down talks between OPEC, specifically with Saudi Arabia and Russia,” Sarah McCrary, the CEO of fuel prices comparison site GasBuddy, told ABC News Monday.
“Effectively what’s happened is in the wake of softening demand for oil, we had expected that there would be an agreement to lower production, to reduce supply … and we would have a gentle change in the market,” she added. “That did not happen.”
Instead, the Saudis announced they were going to slash the cost of oil coming from their market. As a result, consumers can expect to see much “lower prices at the gas pump,” McCrary said.
“We’re going to see much less expensive gas across the nation,” she said. “The largest element in the price per gallon that Americans pay is the cost of the oil that goes into making that gasoline.”
As of Monday, the national gas price average was the cheapest it’s been since last February at $2.38 per gallon, according to the American Automobile Association.
“For the third week, U.S. gasoline stocks decreased while demand increased,” Jeanette Casselano, an AAA spokesperson, said in a statement Monday. “Generally, growing demand amid declining stocks causes increases at the pump, but crude oil prices have dipped to four-year lows, signaling spring could be cheaper at the pump.”
The trend of pump prices falling is likely continue “through the end of the winter driving season if crude remains cheap, especially amid concerns about the coronavirus,” the AAA said in a statement.
The AAA said the largest weekly price decreases have been seen in Indiana (a 12 cent decrease) as well as Michigan and Illinois (which both had an 11 cent decrease). The least expensive markets in the nation are currently Texas (where the average price is $2.06 per gallon) and Mississippi and Oklahoma (where the average price is $2.07 per gallon), according to the AAA.
As gas prices fall, however, McCrary noted that there will likely be more “variability” between retailers and gas stations.
“In the market for example in Miami, Florida, there is a 54 cent difference between filling up in one location versus the other,” she said. “While the overall effect will be a lower price of gas, consumers have to be careful about where they fill up.”
While it means lower prices at the pump, the oil price war coupled with continued economic uncertainty over coronavirus has sent financial markets plummeting Monday.
The oil price war has raised concerns over the U.S. energy industry, and how it will be able to keep up with slashed global oil prices. When Saudi Arabia slashed its oil prices in 2014, it led to layoffs in the U.S. energy industry.
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