If you think $2 a gallon gas is a bargain, imagine what the reaction was when a pair of service stations in Northern Michigan got into an old-fashioned price war this week.
The Beacon & Bridge Market, in the town of Houghton Lake, was first to fire a shot, dropping the price of regular unleaded to just 78 cents a gallon. A neighboring station quickly responded and, for a brief while, motorists were able to fill up for as little as 47 cents a gallon, according to a report from a TV station in the nearby town of Clio.
According to GasBuddy.com, the two stations are now back up a bit, just slightly over $1.50 a gallon. Michigan, as a whole, is now averaging just under $1.70, according to tracking site GasBuddy.com, and the U.S., as a whole is down to $1.873 as of the afternoon of January 19th.
And falling. That’s a penny cheaper than it was just that morning, and nearly a dime less than the week before, GasBuddy reports. Even in California, where motorists pay the highest price, at $2.759, the numbers have tumbled sharply in recent weeks.
Gas prices have averaged just slightly over $2.00 so far this year — $2.002, to be precise – and will likely drop below that milestone rather quickly if the current trend holds. The lowest national average ever seen on January 19th, incidentally, came on 1/19/09, when the figure fell to $1.828 – and when you factor in inflation, that’s actually $2.02 today.
But will the trend hold? Long-term, it’s anyone’s guess. All sorts of factors could nudge the price of oil back up, but for the moment, it’s as if someone pulled the drain plug on prices. On Tuesday, a barrel of benchmark Brent crude dipped below $29.
“Now that Iran has been given the green light to come in from the cold, it is difficult to see where the next rebound in oil prices is likely to come from, raising concerns about further bankruptcy losses across the sector, if as predicted prices fall further towards $20 a barrel,” Michael Hewson, an analyst with CMC Markets, said last week.
Long under strict sanction, Iran was able to sell to only a handful of countries, notably including China. With those restrictions lifted as a result of the new limits on its nuclear program, Iran has said it immediately aims to boost production by 500,000 barrels a day. Some analysts believe it might soon be up by as much as 2 million barrels, though others caution that Iran’s creaking oil infrastructure must first go through some major repairs and upgrades.
Even a modest increase would flow into a worldwide glut, especially if Saudi Arabia, the de facto ruler of OPEC, maintain its current production base. But will it?
Read more of the original article in The Detroit Bureau.