As oil falls to $40, US pump prices drop to­ward $1

Financial Mirror (Cyprus) - - FRONT PAGE -

Re­tail pump prices are driven by four fac­tors: oil prices, prox­im­ity to re­finer­ies, re­fin­ery ca­pac­ity and state taxes and levies. Oil prices have dropped be­low $40, re­cently hit­ting $39.60 a bar­rel. The re­cent de­ci­sion by Saudi Ara­bia to con­tinue to keep its oil ex­ports high has al­most dis­solved the OPEC car­tel. This guar­an­tees over­sup­ply of crude.

Slow­ing na­tional economies in the largest coun­tries, which in­clude China, will lower de­mand. The cost of pro­duc­ing oil from shale de­posits is greater in some cases than what it can be sold for; nonethe­less, parts of this in­dus­try con­tinue pump­ing, in­creas­ing sup­ply.

In some gas sta­tions around the U.S., the price of a gal­lon of reg­u­lar has dropped be­low $1.50. AAA and Gas­Buddy, two or­gan­i­sa­tions that fol­low pump prices, say that less than $2 per gal­lon ($0.53/litre) will be rou­tine around the United States. Al­ready, more than a third of states have prices be­low $2. As oil prices fall, and re­fin­ery ca­pac­ity stays strong, the price of gas could reach $1, par­tic­u­larly in some sta­tions in low-price states, such as Ohio, Mis­souri, Texas and South Carolina.

Sev­eral states house large re­finer­ies or are close to those that do. This is par­tic­u­larly the case near the Gulf of Mex­ico, and the mas­sive re­fin­ery oper­a­tions south of Hous­ton. Some owned by Exxon Mo­bil Corp. pump sev­eral hun­dreds of thou­sands of bar­rels per day.

Gas prices in

sev­eral

states

are low

in large part be­cause of the level of state and fed­eral taxes and levies. The Amer­i­can Petroleum In­sti­tute’s Oc­to­ber state fuel tax re­port put the na­tional av­er­age at $0.4869 per gal­lon. How­ever, in South Carolina, a state with ex­tremely low gas prices, that fig­ure is $0.3515. In the Gulf Coast states, the tax level is $0.3719 in Mis­sis­sippi, $0.3840 in Texas and $0.3841 in Louisiana.

The odds grow each day that gas prices will be $1 a gal­lon in some ar­eas in the United States, and they may go be­low that level across much larger re­gions.

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