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$2 Gas Is Back! Is That Good?

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If you've been to a gas station in recent weeks, you know that fuel prices are low -- crazy low. That seems like a good thing, but is it?

Yes and no.

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According to AAA, today's price for a gallon of unleaded regular averages $2.67. In some parts of the country, you can find it for $2.50, and even cheaper at discount stations. This time last month, the price was nearly 30 cents higher ($2.94), and a year ago, it was more than 75 cents higher ($3.27). 

So, what's the deal? There are a range of factors keeping fuel prices low, but two stick out:

1. We're in the middle of "winter gas" season. "Winter gas" -- technically, just "gas" -- is easier to produce than "summer gas", which is required by law to contain more additives so that it burns more cleanly and efficiently in hot weather. That makes winter gas comparatively cheap, but that's just part of the explanation for today's low fuel prices.

When refineries switch from one type of gas to the other, they scale back on the outgoing version to ensure that they can sell all of the inventory they have. Those slowdowns in production cause artificial shortages, which cause prices to spike -- usually around May and September. Now, in December, we're well into the cheaper winter gas season, and the summer gas changeover is a long way off, so prices are very low. 

2. Oil production in the U.S. is booming. Thanks to new extraction techniques, the U.S. is experiencing a golden age of oil production. While we still depend on imported oil for some of our supply, the country now produces enough gas and diesel to be a net exporter.

That sounds like good news -- and it is for some. For others, not so much.

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WINNERS

Those who stand to benefit the most from low oil and gas prices are:

Consumers: As the U.S. economy continues to improve, inflation has begun creeping upward. Unfortunately, U.S. wages aren't keeping pace, meaning that the money workers earn doesn't go as far as it might. Low fuel prices give consumers a break, allowing them to focus their spending on food, mortgages, education, and the like. Some argue that cheap gas also slows auto sales by allowing owners of gas-guzzlers to keep their rides a bit longer, though there are people who disagree with that, including...

Makers of trucks and SUVs: Chrysler, Ford, General Motors, and other makers of pickup trucks and large SUVs are doing bang-up business these days. That's in part because the truck-loving construction sector is humming along, but also because consumers aren't put off by the lackluster fuel economy most pickups and SUVs earn. (Though it bears mentioning that more fuel-efficient, car-based crossovers are also selling like hotcakes.)

LOSERS

Not everyone is happy about cheap gas, though:

Oil-producing states and countries: States that depends on oil for their revenue -- either from producing the stuff or refining it -- now find themselves in a bind. Soon, they're likely to be forced to make painful budget cuts, trimming funds for schools, hospitals, and other important community resources. Farther afield, in countries that derive most of their income from oil, the situation is much worse. If things don't change, low oil prices could destabilize entire nations, leading to humanitarian crises, mass emigrations, and in extreme cases, terrorism.

Eco-advocates: Campaigns for reduced auto pollution and greenhouse gas emissions work best when gas prices are on the upswing. With fuel prices so low, there's little incentive for consumers to shell out the extra dough needed to buy hybrids like the Toyota Prius, much less all-electric models like the Tesla Model S.


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