Gas prices down in the Twin Cities, expected to go lower

Gas prices in the Twin Cities are near a four-year low, and they are expected to keep sinking, particularly with the oil market in a free fall.

Crude prices hit an 18-year low Wednesday, and one prominent gasoline analyst said retailers have yet to fully pass down their savings to customers.

But there's a rub for consumers. They have a lot less incentive to take advantage of low gas prices as the coronavirus threat has caused a virtual public shutdown and a mass migration to working at home.

The average price of gasoline Wednesday in the Twin Cities was $2.08 per gallon, down from a yearly high of $2.79 last April and almost at a four-year low of $2.06 that hit in January 2019, according to GasBuddy, a price-tracking firm.

In Minnesota as a whole, the average gas price Wednesday was $2.03 per gallon, lower than the U.S. average of $2.17. Minnesota's five-year low was a brief period in early 2015 when gasoline prices sunk to between $1.40 and $1.50 a gallon.

"There is a lot of room for prices to go down further," said Patrick DeHaan, GasBuddy's head of petroleum analysis. "I think gas prices in the Twin Cities could fall another 50 cents."

A price range of $1.40 to $1.60 per gallon is a "reachable average once gas stations pass on the full decline," DeHaan said, referring to the steep drop in oil and wholesale gasoline prices.

Jesse Hihi, owner of a gas station in Lakeville, said prices at Twin Cities gas stations could be much lower already. "It's greed," he said. "They are making a killing, these big gas stations."

Hihi said he bought wholesale gasoline at $1.15 per gallon Tuesday and $1.10 Wednesday. His station, Hihi Market and Gas, had the lowest price in the Twin Cities on Wednesday: $1.49 per gallon, according to GasBuddy.

"I try to be the cheapest in the south metro," Hihi said.

Other stations with the lowest prices in the Twin Cities on Wednesday afternoon, according to GasBuddy, were VP Racing Fuel in Red Wing at $1.53; a Kwik Trip and a Speedway, both in Lakeville, at $1.58 per gallon; Costco outlets in Coon Rapids and Maple Grove at $1.59; and two Kwik Trips in Red Wing at $1.64.

But even with low prices, gasoline demand has been partly destroyed by measures taken to prevent the spread of coronavirus. Hihi said there are seven restaurants within a half-mile of his Lakeville station, but they are shut down.

The duration of the decline in gas demand hinges on the length of the coronavirus lockdown and to a lesser extent the lasting economic damage to consumers' pocketbooks. A gasoline glut could build up, keeping supply high.

"Refiners will run their refineries as long as they can make money," said Sandy Fielden, an oil-industry analyst at Morningstar. "And for a short time, there is a good incentive for them to run as much crude as they can."

West Texas Intermediate, the benchmark U.S. crude oil price, had been trading in a band between $50 to $60 per barrel for much of January and February, but plummeted into the low $30s last week.

WTI was trading just below $23 per barrel Wednesday afternoon. Western Canadian Select, the benchmark Canadian oil price, was going for $11 to $12 per barrel. WCS trades at a steep discount to WTI due largely to transportation costs.

The Twin Cities' two oil refineries are big users of Canadian oil.

Then the specter of a huge supply glut materialized within the past two weeks. Saudi Arabia opened its oil taps full-on, the result of Russia's refusal to go along with output restrictions.

A rapprochement between the two would help tighten oil markets, DeHaan said, and it would make sense given the harm low crude prices can do to both countries' economies.