US gas prices fall below $2 per gallon for the first time in 4 years amid COVID-19 outbreak, crude price war

gas prices recession US

  • The national average for a gallon of regular gasoline dropped to $1.99, a four-year low, according to an AAA report released Tuesday.
  • Prices have been dragged down by the coronavirus pandemic and ongoing oil price war between Russia and Saudi Arabia.
  • Ongoing turmoil will likely send gas prices even lower - AAA estimates the average will fall to $1.75 or less in April.
  • Lower gas prices may not help the US economy this time around, according to the Bank of America.
  • Read more on Business Insider.

The coronavirus pandemic and ongoing oil price war has sent US gas prices to their lowest levels in four years.

The national average for a gallon of regular gasoline dropped to $1.99, according to an AAA report released Tuesday. It's the first time the average has fallen below $2 in more than four years, and AAA expects them to go even lower. Advertisement

"Today, motorists can find gas for $1.99 or less at 68% of gas stations in the country," said Jeanette Casselano, a spokesperson for AAA, in a statement.

Gas prices have been in decline recently amid a tumultuous global backdrop - the coronavirus pandemic has significantly lowered demand for oil and gas as consumers cut travel and airlines cancel flights. In addition, the price war between Saudi Arabia and Russia threatens to boost supply to record levels.

That's pushed crude prices to their lowest levels in 18 years, around $20 per barrel. Both US West Texas Intermediate and Brent crude oil are on track for their worst quarter ever.
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The group expects gas prices to keep dropping as cheap crude combines with the realities of people staying home, lowering the demand for gas. The national average could hit $1.75 or less in April, according to the report.

Read more: Bank of America examined the stock market during every recession since 1929 and concluded the recent meltdown is not over. Here's their trading strategy for a deeper crash. While lower gas prices are usually a good thing for the US economy, they might not be helpful this time around, according to Bank of America. Advertisement

"Bottom line: the outbreak is causing a meaningful shift in the consumer basket and lower oil prices are unlikely to be the jet fuel for consumption that they would be in a more normal environment," a team of analysts led by Alexander Lin wrote in a Tuesday note.

In a normal environment, consumers would take advantage of extra money back in their pockets from lower gas prices to drive more, spend more on goods and services, pay down debt, or build up savings, the report said.

But the current situation is not a normal environment, according to the firm, as the US consumer has been sidelined by COVID-19. A recent report by Bank of America showed that gasoline spending slumped 37% on the year between March 17-24. Advertisement

"The decline in oil prices will result in a sizeable shock to investment with not much of a consumer offset," the firm said.

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