In normal times, consumers might embrace plummeting gasoline prices as a major boost for family budgets.
But with the coronavirus wreaking havoc on people’s daily lives and the economy now teetering on a recession, local consumers say falling pump prices, while welcome, are significantly overshadowed by the unprecedented crisis now gripping New Mexico and the rest of the nation.
“I like the price being down, but the whole economy is coming down along with it,” Alejandra Perez said as she pumped regular unleaded for $1.78 a gallon Monday at Sam’s Club on North Renaissance NE in central Albuquerque. “I don’t like that. It’s scary to see prices like this with everything we’re going through now.”
Across the street at Costco, Richard Deichsel said the $1.67 a gallon he paid for regular unleaded is little compensation for the damage being done to the state’s oil and gas industry.
“I think it’s sad, personally,” Deichsel said. “This situation is weighing heavily on the oil business. It’s going to put a lot of people out of work.”
Price war at play
Indeed, the coronavirus is one of the principal causes for plummeting gas prices, as demand for fuel shrinks across the nation and the globe in the face of travel bans, quarantines and businesses closures and slowdowns. Prices have been steadily declining since the coronavirus first appeared in China in early January, chopping nearly 20 cents a gallon off the national average for regular unleaded by early March.
Since last week, however, prices have spiraled downward because negotiations broke down between Russia and members of the Organization of Petroleum Exporting Countries over proposed production cuts to ease the world oil glut caused by the coronavirus.
Now, Russia and Saudi Arabia are locked in a price war, with both countries planning to flood the market with freshly pumped petroleum once their current price stabilization agreement expires March 31.
With the threat of massive oversupply looming and the coronavirus pandemic shutting down economies around the world, oil prices have crashed to their lowest levels since 2016, when the industry was mired in a two-year downturn. Prices for U.S. benchmark West Texas Intermediate hit $26.80 a barrel on Tuesday, down from nearly $60 a barrel in early January and $41.28 on March 6, just before the Russia-Saudi Arabia price war began.
Prices collapsing
Gasoline prices, in turn, are now in free fall because crude oil prices make up about 60% of what consumers pay at the pump. The national average for regular unleaded slid to $2.16 on Monday, down from nearly $2.60 in early January, according to AAA.
“Market analysts project national prices falling below $2 a gallon by the end of March,” AAA Texas/New Mexico spokesman Joshua Zuber told the Journal. “It’s tough to tell what will happen, because we’re in a situation we’ve never seen before with both the coronavirus and disagreements between Russia and OPEC pushing oil prices down. As we get into April, analysts expect oil prices to plummet even more, pushing gas prices further down.”
In New Mexico, the statewide average for regular unleaded hit $2.09 a gallon Tuesday, according to Boston-based GasBuddy, which tracks gasoline prices nationwide. And in Albuquerque, the average is even lower, said Patrick DeHaan, head of petroleum analysis at GasBuddy.
“It crossed under $2 a gallon on Tuesday,” DeHaan told the Journal. “It’s selling at $1.99 a gallon in some places, and as low as $1.59 in others.”
As prices decline, consumer savings mount. The typical consumer pumps gas for a 14-gallon tank, according to AAA. With the average price for regular unleaded now at $2.09 a gallon, most New Mexico consumers are already saving about $5 on every fill-up compared with early January, when gas sold at $2.44 a gallon.
Nationwide, motorists are spending about $820 million a day on gasoline at current prices, DeHaan said. That’s about $133 million less than a year ago, when consumers spent about $953 million per day.
With prices falling almost daily, GasBuddy says consumers should shop around for the best deal.
“Many consumers pull in at the first low-priced station they see,” DeHaan said. “But there’s almost a 60-cent spread between the highest and lowest prices in Albuquerque.”
Driver reactions
Some local consumers say price declines are considerably cutting their travel expenses. Karla Blair, a construction and capital projects manager at Los Alamos National Laboratory, said she drives about 1,000 miles a week to commute from Albuquerque to Los Alamos. She filled up at $1.78 a gallon Monday at Sam’s Club in the Renaissance business park.
“That’s great,” Blair said. “It will shave about a third of my weekly cost for gas.”
Alfred Desiderio, a silversmith who commutes from Grants to Albuquerque every day, filled up at $1.82 a gallon for regular unleaded Monday at Murphy Express, 2707 Carlisle NE.
“It helps a lot,” Desiderio said. “I’m saving pretty well because of it.”
Others, however, said the coronavirus is causing far more hardship than the help they get from low gas prices.
Rosa Reyes filled her Chevy Traverse at the Valero station at 712 Camino del Pueblo in Bernalillo at $1.67 a gallon Tuesday, saving about $10 for the fill-up compared with a few months ago.
But Reyes, who cleans hotel rooms in Albuquerque with her sister, said both of their weekly shifts were just cut from 40 hours to 18.
“The gas prices help, but they just reduced our shifts and we have less money now,” Reyes said. “We don’t know what to do. We’re scared, but not by the coronavirus — by the economy.”
