Gas prices hit a six-year low on Monday, with Minnesota drivers paying an average of $1.74 a gallon and some as little as $1.54.
The price of gas might bump up in late February and early March, when refineries switch to making summer-grade fuel, but analysts are predicting that gas prices for 2016 will be lower than last year, when the average prices were the lowest in a decade.
That extra change in the pocket will mean more road vacations this summer for some people, while others might be looking to buy bigger or sportier cars, according to national researchers.
Analysts warn that low gas prices will eventually go away, climbing back over $3 a gallon in a few years.
Oil companies aren’t making much money now so they’re cutting back on drilling, said Patrick DeHaan, a senior petroleum analyst at GasBuddy.com. But when supplies dwindle in three to five years, DeHaan said prices will rise. “We won’t likely see record-breaking gas prices, but we will see $3 and $4 prices come back,” DeHaan said. “So don’t be too complacent with the low prices.”
For now, vehicle owners are enjoying the ride to pump prices of yesteryear. In Minnesota the last time gas went below $1.74 was on Jan. 6, 2009, said Gail Weinholzer, spokeswoman for AAA in Minnesota and Iowa.
Pump prices that have fallen to almost feel-good levels have been sliding almost every day since Jan. 6, DeHaan said.
“I expect the downward trend to continue, thanks to the continued drop in the price of crude oil — which is now just under $30 a barrel,” he said.
The last time crude oil prices were that low was in 2003, DeHaan said.
DeHaan said he wouldn’t be surprised if pump prices fell to $1.60 to $1.50 a gallon.
Hit the road
Cheap gas usually sparks people to drive more, DeHaan said. “But it’s winter,” he said. “Come summer, I expect to see the demand for gas be the strongest it’s been the last five to seven years.”
When fuel prices were up from 2011 to 2014, road trips weren’t popular, he said. “But last summer, prices dropped and motorists hit the road. They had an itching to get out.”
According to AAA, Americans saved about $550 last year because of cheaper gas. And they traveled the most miles in U.S. history, Weinholzer said.
That meant more accidents, she said. Crashes last year killed 405 people in Minnesota, the highest number since 2010, when 411 people were killed, according to the state Department of Public Safety.
Low gas prices also mean an uptick in sales of bigger vehicles, DeHaan said.
“People have short-term memories, and inevitably when prices are much higher in three or four years from now, they’ll be stuck with that vehicle.”
At the University of Michigan’s Transportation Research Institute, Michael Sivak and Brandon Schoettle track the fuel economy of new vehicles sold in the U.S. As fuel prices have slid, sales of pickup trucks, SUVs and crossovers rose, causing a slight dip in average fuel economy.
Falling gas prices remove the motivation for some to get the most fuel-efficient vehicle, Schoettle said. “Unfortunately, for most people, their decision seems to be based on the financial impact and they’re a little less concerned about the environmental side of things.” Meanwhile, sales of hybrid vehicles and electric cars start to shrink, he said.
Jon Barrows, general sales manager at the Jeff Belzer dealership in Lakeville, said that while “people are cautious about the volatility of fuel prices, I don’t think it necessarily directs their long-term buying decisions,” he said. “People right now are just saying, ‘Wow, it’s nice to fill up for half of what it used to cost.’ ”
Minnesota is a “truck state,” said Scott Lambert, executive vice president for the Minnesota Automobile Dealers Association. “We buy more trucks than cars, but that’s true whether fuel prices are high or low.”
But last year, the gap between bigger vehicles and cars got wider. Sales of light pickups and SUVs through October 2015 made up 66 percent of new car sales, compared with about 59 percent the year before, he said.
“For the most part, people buy vehicles that suit their lifestyle,” Lambert said. “If you’re hauling boats and snowmobiles and kids to hockey, you’re going to need that SUV or minivan or truck.
“Gas prices are talked about and can be an inconvenience but … they don’t direct a consumer’s choice.”