Prices for gasoline at Costco and Walmart are finally cheaper than they were in the 80s

Costco and Walmart are selling gasoline for an average of $2.19 per gallon, just a penny below what the pump was charging in early April, according to AAA.

Until about seven years ago, Americans would be hard-pressed to find cheaper gas on most days. But in that time gas prices have fallen rapidly, largely due to the shale oil revolution.

The average retail price for a gallon of regular gas is about 40 cents less than in mid-2016. That’s when crude oil prices started to dive, thanks to an industry-wide oil glut, tight domestic supplies and sluggish world growth.

Less choice, higher prices

There are certainly other factors at play, but lower gas prices almost all have to do with high oil prices. Consumers have fewer choices to keep pumping gas, as independent dealers are vanishing and grocery chains decide to cut back on gas purchases. And by dropping gas prices, gas retailers are also lowering the prices they give customers, also reducing the bargaining power of drivers.

So, while today’s $2.19-per-gallon price at the pump may appear like a bargain, for many, gasoline prices are still higher than they should be. Gas isn’t cheap because the wholesale price for gasoline is low, but because retailers are discounting the price of gas to lure more customers into their stores, according to Jennifer Schulz, a research analyst at the Consumer Federation of America.

A crunch approaching

The wholesale price of gasoline is currently $2.64 per gallon. But over the next few months, motorists can expect that price to continue to fall.

Most of the reason is that more oil and gas are being produced in the United States thanks to the growth of the shale industry. The United States is now the largest oil producer on the planet, and that is leading to a crush of excess gasoline stocks, since there’s a limit to how much oil can be pumped before the entire system becomes flooded with product.

To get rid of that excess, the U.S. Energy Information Administration, which is part of the Energy Department, predicts that the nation’s oil production will fall from around 9.5 million barrels a day currently to around 9 million barrels a day by the end of the year. That’s right when supplies are reaching their peak, and the shutdown of an important refinery in Texas will mean some oversupply.

What it all means

It will take several weeks, but eventually as gasoline supplies drop, you will begin to see higher gas prices at the pump. Some cities may even start seeing prices climb past $3 per gallon by mid-September.

It’s unclear what price spike Americans will see in the short term. For the foreseeable future, oil prices are expected to remain stable, which means there won’t be an obvious hit to retailers like Costco and Walmart that rely on low gas prices to drive sales. But that may change.

See also: Cone and hackfull fuel highway speed traps

Leave a Comment