Covid-19 impact on Gas

Marie Dodds with Triple A discusses the coronavirus impact on gas and why prices are more expensive in Oregon than just about any other state

Seen over as we've seen over recent weeks, gas prices have dropped significantly because of, at least in part, the coronavirus pandemic.

Joining us now from portland is marie dodds, the director of government and public affairs with aaa.

Thanks for much for joining us.

Thanks for having me.

So there really are two parts in our gas drop, right?

There's the demand side and the supply side.

Can you go over how those two interplay.

You bet.

Well, it's just like we learned way back in economics one oh one supply and demand.

We have a lot of supply right now.

In fact, any way you slice it, the supply is at record levels.

In fact, in some places in the u s we are literally running out of storage where we can put gasoline and oil.

So we have a huge supply at the same time, demand is very low and the numbers are pretty staggering when you look at them.

I track these numbers a week after week, year after year, and i was blown away by this number.

Our demand in the u s right now is currently at about 5.3 million barrels a day.

This is about as low a demand as we've seen since.

Get this this spring of 1968.

Normally in april.

In fact, a year ago, our demand was running about nine and a half million barrels a day.

So with excess supply and very low demand, we are seeing prices for gasoline and diesel fall and or again, this week has the dubious distinction of being one of only 11 states where we still have an average above $2 a gallon.

We get this question all the time.

Why is oregon's gasoline so much more expensive than you can get in so many other states?

Absolutely.

And that's the question i get all the time.

As you can imagine, there are a couple of major reasons for that.

First of all, oregon is located far away from parts of the country that drill and produce and refine oil and gas.

So in the most simplistic terms, it costs more money to get the product here.

Another factor that impacts gas prices here on the west coast is that we have, um.

Some tough environmental policies and programs in place because we want to keep our air clean here, and those make it more expensive for us to make that gallon of gas.

So those are the major impacts on gas prices here.

You know, we're basically far away from the gulf coast where we have a lot of operations, and so it just costs more to get that product here.

So as you look into the future, i know there's a price war going on, manufacturing war between russia and saudi arabia, like any geopolitical politics, what's going to happen to american suppliers.

When this is over, do we keep those folks in business?

That's a really tough question and of course we will have to see how long this goes on and what happens.

But, um, long story short, crude oil right now is trading around $13 a barrel.

Now that's up significantly from a week ago when crude oil went down into negative territory for the first time, it went down to negative.

$32 and 63 cents a barrel.

So basically people who had oil were paying you to take it off of them.

Now, just a few weeks ago, oil was above $50 a barrel, and we started the year around $60 a barrel.

So there are many who say that in order for north american companies to stay in business, crude oil has to be around that.

$50 a barrel mark.

So it will really be tough for some of these oil companies, especially some of the smaller ones in north america to make ends meet and stay in business.

So what happens on the other, this other end of this in terms of demand, do they have the capacity to refine all those crude that's sitting in storage and making sure that there is enough gas at the pump when we do start going back to work.

Yes, we should not see any gasoline shortages, at least not any longterm shortages.

It will be very interesting to see what happens when we start to get back to normal or the new normal, whatever that is.

But i would imagine that it will occur gradually.

You know, it isn't like we're all going to end a friday and then on monday morning we're all going to be magically back at work and back at school.

Um, so i think things will be ratcheting up slowly, so that should get enough time.

For refiners and distributors to get the product where it needs to go, but certainly the markets are keeping an eye on that and looking at demand in the future.

What happens when some restrictions are, are starting to be lifted?

What happens when people travel again?

Will we see a travel season this summer?

So those are all things to keep in mind.

In the short term, i think gas prices will continue to fall a bit more.

There is a floor on how low gas prices and go because there are costs involved in producing and distributing that product, but i think the national average and the oregon average have a little bit of wiggle room and we could drop another 10 to 15 cents before we bought them out.

And aaa, we appreciate the information in the background.

Thank you