“With more people working from home, demand is going to decrease, and with demand decreasing, prices are going to decrease,” AAA spokeswoman Jeanette Casselano said in a phone interview.
Crude oil prices, which make up the majority of the cost of gasoline, began declining worldwide almost immediately after the new year in response to coronavirus concerns. By the start of February, crude was selling at $50 a barrel, down $10 from the start of 2020.
But prices toppled in March as the coronavirus spread and members of the Organization of the Petroleum Exporting Countries and Russia, called OPEC+, could not agree on production cuts. Instead, Saudi Arabia chose to flood the market with crude, setting off a price war with Russia. Saudi Aramco, the state-run oil company, said it planned to pump 12.3 million barrels of oil a day in April.
Crude traded for $22 a barrel midday Friday.
That dramatic increase in supply met the lack of global demand and tanked prices, something finally starting to emerge at the pump. Gas prices Friday were down 27 cents a gallon since the start of March, AAA reported, and are expected to go lower.
Even as supply increased, demand for oil has, too, week over week since the start of 2020, according to AAA. Next week, experts expect demand to drop for the first time, which will dent the value of fuel even more.
But consumers aren’t expected to see much cost savings specifically because of that drop in demand. If more people are working from home, or choosing not to leave the house because of health concerns, they aren’t using any of the gas in their tank, which means they have no reason to go fill up.
“People love savings at the pump. You feel like you’re getting a great deal,” Casselano said. “But at a time when everyone is working from home, consumers aren’t necessarily reaping the benefits.”
Orders from public health officials to stay home could close gas stations in some jurisdictions, which would temporarily tamp down supply but still won’t do anything to drive up demand. That will come when drivers are finally able to get back on the roads routinely. That may send oil prices spiking upward as quickly as they came down.