Gas prices continue to tumble as Texas average breaks $2 a gallon

Used to be, you had to know where to get cheap gas. It was, well, like a hunting expedition.

Not anymore.

Texas drivers are paying an average of $1.98 for a gallon of unleaded regular, with 77 percent of the state’s convenience stores and gas stations selling fuel for $2 or less, according to the AAA Fuel Gauge released Thursday. The national average Friday was $2.21.

The price in Texas is 6 cents below last week and 92 cents less than last year, AAA reported. Fort Worth drivers are paying $1.94 and Dallas motorists $1.98. The cheapest gas in the state is in Texarkana: $1.91.

And prices may drop further. Analysts are sticking with predictions that the national average may dip below $2 by the time the turkey is carved on Thanksgiving Day, but for sure by the time the Christmas presents are unwrapped.

Nationally, prices are at their lowest since 2009, but only 1 in 4 stations is selling gas below $2 a gallon — and only 1 percent above $3, said Michael Green, a spokesman for AAA in Washington, D.C.

“Gas prices have declined 13 days in a row for a total of 10 cents per gallon,” Green said Thursday. “There is a clear trend that prices are dropping faster and faster. … People hoping to save around Christmas are in for good news this year,” he said.

Will Speer, a senior petroleum analyst with GasBuddy.com, says there is “still room for it to get even cheaper” and expects gas to go as low as $1.70 to $1.80 by year’s end.

“The further you get into winter the cheaper gas gets,” Speer said. “I think we are destined for sub- $2” nationally if the price of crude oil remains weak.

Falling leaves and gas prices

There are a lot of reasons gas prices drop during this time of year along with the fall foliage.

Each summer, refineries switch the blend of gasoline to a fuel that burns cleaner to meet federal emission guidelines. This process begins in February and ends in June, but refineries must produce the summer blend no later than April and retailers must start selling it May 1.

Beginning in September, refineries switch to a cocktail that includes more butane as an additive, which is cheaper to produce and plentiful, adding to the decline in prices. Historically, gas prices peak at Memorial Day and moderate until the beginning of fall, with a slight bump at Labor Day.

“People drive less as the days get shorter and the temperatures get colder,” Green said.

Prices will stay lower until February or March, when the switch for the spring fuels begins.

During the fall, refineries also undergo routine maintenance — after working hard to meet higher demands during the summer — to make sure they are ready for winter. This year, U.S. demand for gasoline through the first half of the year was 9 million barrels a day, an increase of 3 percent over last year, the U.S. Energy Information Administration reported.

Still, planned refinery maintenance in the fourth quarter is not expected to diminish the supply of gasoline and other distillates, the agency reported this week.

“That heavy utilization rate with refineries takes its toll. … All of that is beginning to end and as a result most experts see cheaper prices ahead,” Green said.

Of course, predicting gas prices is a game of chance, analysts warn. A lot of other factors can influence crude oil prices and eventually the price of gas, including events in Syria, Russia and China. Domestically, there could be a refinery outage.

But there is a glut of oil on the market that should keep prices down, too, Speer said. For the past few days, the price of crude oil has hovered around $45 a barrel, far below the peak price in June of $61.43.

“OPEC shows no sign of slowing down, U.S. production is still healthy despite the lower rig count and there is lower demand out of China,” Speer said. “There is nothing that points to higher crude oil prices in the short term.”

The race to $2 or less

Nobody who sells gas wants to be the last to drop below $2 a gallon, analysts said.

In Texas, as the price dropped in the past few weeks — during the week of Oct. 8 the average price of unleaded was $2.06 — gas stations and convenience stores have been rushing out to change their marquees.

Though more than 3 of 4 gas stations in Texas were selling gas for $2 or less this week, the previous week about 55 percent were pumping gas at that price and a month ago less than half were below that mark, AAA reported.

On Friday afternoon, 15 gas stations on Gas Buddy’s local website, fortworthgasprices.com, selling unleaded for $1.73 or less. The cheapest gas was at a Valero in Benbrook, with a cash price of $1.68.

“No station wants to be $2 a gallon and lose out on business,” Green said. “That less than $2 is an attractive price point for consumers.”

John Benda, the owner of Fuel City, a discount gasoline retailer near downtown Dallas, on Thursday was selling $1.87 gas that cost him about $1.80. That doesn’t mean he is making 7 cents profit, since retailers pay a fee when customers use a credit or debit card.

Those fees will average between 2 and 3 percent, but go as high as 4 percent, according to a 2015 report from the National Association for Convenience Stores. Since 78 percent of motorists pay with plastic, the reports says, retailers can make a few cents profit, or they could lose money.

Benda and others will try to make up the difference by what they sell inside their stores. Benda’s stores are known for their tacos and fried pies, among other things.

Benda, who plans to build a Fuel City operation near downtown Fort Worth in the next year, said he doesn’t see pump prices going much lower.

“It starts to pinch the pocketbook,” Benda said. “I’m in a little crunch time right now.”

For Chad Calvert, who was buying gas Friday morning during a downpour, the lower prices were as big a blessing as the rain. An electrician from Arlington, he fought through long lines to pay less at the pump, which makes it easier on his business’s bottom line.

“I think it’s great. I drive all over the Metroplex. Cheaper gas, I make more money,” Calvert said. He was paying $1.74 a gallon for unleaded at the QuikTrip at North Cooper and Road to Six Flags. “I just filled up for $36. This time last year it was closer to $60.”

At the next pump over, Larry McNeill was more philosophical. He thinks the lower prices are great but acknowledges that they may hurt others. He also doesn’t expect it to last.

“I think it’s nice but I think we’re going to pay for it later,” McNeill said. “I think prices will go back up and we’ll be back to where we were a few months ago. It has hurt us a lot because a lot of people have lost their jobs because of low gas prices, and that’s not a good situation.”

This story was originally published October 23, 2015 at 3:37 PM with the headline "Gas prices continue to tumble as Texas average breaks $2 a gallon."