The Trump administration is threatening to impose tariffs on imported oil, which could effectively put a floor under the plummeting price of gasoline.
AAA reported national gas price average is $1.92. That is 9 cents cheaper than last Monday, 48 cents less than a month ago and 81 cents less expensive than a year ago.
However, there is ample anecdotal evidence that pump prices are substantially lower at many stations, such as at a Costco in Macomb County outside Detroit where gasoline was selling for 99 cents per gallon, according to Facebook posts.
(National average for gas prices tumbles below $2 a gallon.)
During the weekend, President Donald Trump also noted that “gasoline was cheaper than water. Who would have believed that,” he said during a weekend press conference.
Trump also noted the sudden drop in gasoline prices also amounted to an immediate tax cut for American consumers. However, Trump also appeared to be of two minds on the issue, noting in a press briefing Sunday that the U.S. has no choice but to protect its own domestic oil industry. “Tariffs are very powerful weapon,” said Trump, notes that thousands of jobs are lined to the oil and gas industry.
AAA noted pump prices continued to fall with gasoline demand registering at its lowest point since 1993 due to the shutdown of the U.S. in the face of COVID-19 pandemic, which has claimed more than 10,000 lives since March 1.
The federal Energy Information Administration (EIA) weekly report puts demand at 6.7 million barrels per day – a nearly 30 year low – and it’s likely to push lower as Americans are urged to stay at home at least until the beginning of May.
“This week, market analysts are watching crude oil prices, which started to increase at the end of last week,” said Jeanette Casselano, AAA spokesperson. “However, given the low demand readings, increases in crude aren’t likely to have an impact on gas prices in the near-term.”
In addition to crude oil, market analysts are also watching refinery rates.
(Gas prices tumble as coronavirus strikes the U.S.)
At the end of Friday’s formal trading session, WTI increased by $3.02 to settle at $28.34 per barrel. Domestic crude prices increased at the end of last week, following news that the Organization of Petroleum Exporting Countries (OPEC) and its partners, including Russia, planned to hold an emergency meeting to discuss potential crude production cuts amid the global oversupply caused by COVID-19.
Russia, Saudi Arabia and the other members are slated to meet this week to see if they can implement production cuts that would
stabilize oil prices, which have fallen by two-thirds since the first of the years.
Trump said last weekend he believes feuding Russian and Saudi producers will be able to resolve their differences and move to stabilize prices, making it unnecessary to use tariffs.
However, OPEC and its partners have moved the meeting to Thursday, April 9. Crude prices are likely to remain volatile this week until the meeting, where the market will be looking to see if production cuts are enacted and if they are drastic enough to curb the growing oversupply of crude in the global market.
Meanwhile, the administration has been allowing American drilling companies to store oil temporarily within the U.S. Petroleum Reserve so it can be shifted on to the market when prices move higher. Other storage options are filing rapidly and the EIA reported that amount of gasoline jumped by 8% last week.
In the U.S. though, according to press accounts, there is something of split among oil producers.
(White House set to reveal final fuel economy rollback.)
Domestic companies that have benefitted from the fracking boom apparently open to some kind reduction in the production in the U.S. to stabilize prices and their shaky finances. At the same global producers, such as Exxon Mobil and Chevron, the heirs of the old Standard Oil Trust, reportedly pushed back against the idea of voluntary production in the U.S.