All but three states have seen average gas prices fall at least $1 during the second half of 2014, according to data provided by AAA.
Gas prices dropped the most in Ohio, where the average price for a gallon Monday was $2.03, a full $1.9 lower than it was on June 1, according to data provided by AAA’s Daily Fuel Gauge Report, the automotive and travel information nonprofit’s gas-price-tracking Web site. Just three states have seen price declines of less than $1 from June 1 to Dec. 29. Average prices fell by 99 cents in Vermont, 92 cents in Alaska and 83 cents in Hawaii. No state saw gas prices rise.
A number of factors have contributed to the plummeting price of crude oil worldwide since June, which has resulted in lower prices at the pump. But there are also a variety of reasons for the variable size of the decline among states, AAA spokesman Michael Green says.
“Most of the difference has to do with the starting date of June 1,” Green said in an e-mail. “Midwestern gas prices were relatively high in the late spring due to unexpected refinery issues. These problems restricted gasoline supplies at a time of year when lots of people were driving. A comparison from June 1 through today therefore would have Midwestern states — such as Ohio, Michigan and Indiana — with the largest price declines. As the summer continued, the refinery issues in the region improved and became less of a factor.”
Generally, money saved at the pump is money in consumers’ pockets, so in that sense the drop in oil prices has been positive for the economy. But declining oil prices have had a variable effect beyond the pump. The low prices have energy-dependent states on edge as revenue could suffer dramatically if the declining prices are sustained.
As we reported earlier this month, Alaska is particularly at risk, with its expected budget deficit for the year growing from $1.4 billion to $3.5 billion thanks to the plummeting crude oil price. On Friday, Gov. Bill Walker put spending on hold for six big projects precisely because of that swelling deficit. If the price recovers soon, it shouldn’t hurt Alaska too much. The state has at least $15 billion in reserve, according to various estimates. Of course, if the decline is sustained, it could prove painful.
How long the decline in oil prices will last is anyone’s guess, but prices won’t drop forever and, if history is any guide, gas prices may well rebound, argues the New Yorker’s James Surowiecki:
It would be a mistake for oil producers to expect a return to the high, stable prices of recent years. By the same token, American consumers shouldn’t get too used to cheap gas, since in the long run low oil prices erode the conditions that brought them about. Producers are already starting to adjust: ConocoPhillips just announced that it’s cutting its drilling budget. And, because cheap oil gives everyone an economic boost, eventually it leads to higher demand. We’re awash in oil right now. Soon enough, we may be wondering where it all went.
Once the market stabilizes, gas prices will once again be primarily determined by fundamentals such as refinery disruptions or maintenance, says AAA’s Green. “By summer, prices also could rise due to high demand and the switchover to summer-blend gasoline,” he says.