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Experts agree that the steep decline of gas prices can be attributed to the coronavirus in some way.
However, the COVID-19 virus isn't the only actor.
At an OPEC meeting on March 5, "tempers [potentially] flared" as Russia and Saudia Arabia decided to increase its oil production, GasBuddy's head of petroleum analysis and media relations Patrick De Haan told Business Insider.
The expectation going into the meeting was that there would be a cut in oil production to alleviate the crude oil price drop that had come with a decreasing oil demand amid the coronavirus pandemic.
AAA spokesperson Robert Sinclair estimates that the national gas price average may drop as low as $1.30 or $1.34 per gallon because of the pandemic and increased oil production overseas.
Gas prices are hitting an "unprecedented" low as the coronavirus ravages the economy.
However, it's more than just the virus itself. The root of the gas price drop stems from both the pandemic, and an "emergency" Organization of the Petroleum Exporting Countries-Plus (OPEC+) meeting on March 5 in Vienna, Austria.
The meeting was held in response to the decreasing global demand and price drop of oil that started in February because of the coronavirus, GasBuddy's head of petroleum analysis and media relations Patrick De Haan told Business Insider.
There was an expectation going into the meeting that there would be a cut in oil production to alleviate the crude oil price drop. However, the opposite happened, mostly in part because of potential "temper flares" as a result of a "reckless" oil rivalry between Russia and Saudia Arabia that continued into the OPEC+ meeting, according to De Haan.
"Russia went off on its own and said, 'The heck with you guys. We're going to produce as much as [we] want, as much as we can.' So the [Saudia] Arabians essentially said, 'Oh yeah? Watch how much we can produce," AAA spokesperson Robert Sinclair told Business Insider.
De Haan also hypothesizes that the two oil rival countries saw this as a chance to decimate the US oil shale industry while the country is economically compromised because of the pandemic.
Oil rig pumpjacks near Long Beach, California on July 30, 2013.
REUTERS/David McNew
"My theory is that perhaps [Russia and Saudi Arabia] wanted to see the US oil sector suffer very acutely," De Haan said.
Refinery workers at the LyondellBasell oil refinery in Houston on March 6, 2013.
REUTERS/Donna Carson
"It would have been a very difficult time for these oil producers in the US to survive this because demand is so much lower, but then Russia and Saudi Arabia ... made things even worse," he continued.
A worker at an oil pumping station in Russia in March 26, 2015.
REUTERS/Sergei Karpukhin
De Haan also said that this will put oil producers in the US in "grave risk of their viability in the weeks ahead."
Tesoro's Los Angeles refinery on October 10, 2014.
REUTERS/Lucy Nicholson
While several analysts have compared the coronavirus impact on the airline industry to the 9/11 terror attacks, Sinclair says that the virus has set a "precedent" for the oil industry.
Grounded American Airlines passenger planes at the Tulsa International Airport in Oklahoma on March 23, 2020.
Nick Oxford/Reuters
Lipow also estimates that gasoline demand has dropped 15% globally and 30% across the US.
An empty, but normally busy, road leading to Dallas on March 24.
LM Otero/AP Photo
However, this US number varies according to different regions of the country: Lipow estimates that demand is off by 40% on the west coast …
Near-empty roads in Seattle's South Lake Union neighborhood near the Highway 99 entrance to the Seattle Tunnel and Mercer St. on March 26.
Ted S. Warren/AP Photo
… while more "rural" parts of the country — such as North Dakota, Wyoming, and Idaho — demand is off by significantly less, at around 18%.
Drills for oil near Williston, North Dakota on December 15, 2014.
Eric Gay/AP Photo
This drop especially affects refiners in the US as the decrease in demand has shot down faster than refiners can reduce its supply, according to Lipow.
Now gasoline is being stored in any remaining storage tanks at terminals across the US in the distribution system that provides storage facilities for gas, diesel, and fuel.
Storage tanks at a shale gas well pad in Zelienople, Pennsylvania on October 17, 2019.
Keith Srakocic/AP Photo
While Lipow predicts there will be a slow recovery in gas demands, refiners will be able to increase production quickly because of the excess crude oil that's currently available.
"Across the United States, refiners are cutting their production rates by 20% in order to cope with the demand destruction," Lipow said.
Bayway Refinery of Phillips 66 in Linden, New Jersey on March 30.
Mike Segar/Reuters
"Some refiners, especially on the West Coast, are going to have to make even deeper production cuts because the loss in gasoline demand is more pronounced," Lipow continued.
Oil rig workers and contractors doing maintenance work at refineries are also taking a hit as a result of the decrease in oil demand.
A Seneca Resources shale gas well drilling site in St. Mary's, Pennsylvania on March 12.
Keith Srakocic/AP Photo
And while logistics companies, construction companies, airlines, and general car owners are some of the only people and industries able to take advantage of this decrease in oil prices, many of them are unable to do so because the pandemic has halted several industries, especially airlines.
People walk through a sparse international departure terminal at John F. Kennedy Airport (JFK) as concern over the coronavirus grows.
Spencer Platt/Getty Images
"[These independent stations keep] their prices artificially high because the margins for them in times when gasoline and oil prices are expensive are very small," Sinclair said. "These small gas stations that you see selling coffee, that have convenience stores attached to them, most likely they're making more on the cup of coffee that they sell you than the gasoline that you purchased."
Josephina Romano fills her vehicle with gas at a U-Gas station on October 19, 2015 in Miami, Florida.
Joe Raedle/Getty Images
"So when prices are really low like this, the margins are even smaller for them, and demand even lower," Sinclair continued.
A gas station's pump gas prices in Ridgeland, Mississippi on March 31.
Julio Cortez/AP Photo
In terms of when gas prices will start rising again, the experts agree that it will only come when the coronavirus pandemic slows down.
Medical staff at ProHealth in Jericho, New York, are on hand to test people for coronavirus on March 25.
J. Conrad Williams, Jr./Newsday RM via Getty Images
"We're ... on for the ride whichever way the coronavirus goes," De Haan said.
A hearse car backs into a refrigerated truck to pick up deceased bodies outside of the Brooklyn Hospital on April 1 in New York City.
ANGELA WEISS/AFP via Getty Images
"If the current shelter-in-place system works and if we eventually start getting out of our houses again as lives return to normal, that's really the only rebound that I would see when demand starts to perk up," De Haan continued.
Normally busy downtown streets are virtually empty at rush hour due to coronavirus fears in Seattle on March 12.
John Moore/Getty Images
However, Sinclair warns that as more people start leaving their homes and driving on the roads again — and gas prices subsequently start rising — an evergreen issue will appear once again: infrastructure.
This lack of road traffic, and therefore lack of gas being purchased, will result in a loss of about 30% in gas tax revenue for the government to use on infrastructure projects, according to the American Association of State Highway and Transportation Officials based off of data from the prior recession.
"If we're back to normal by Memorial Day, the first summer road trip, I have a feeling that we're going to see record volumes of drivers after having all this cabin fever...that will accelerate wear and tear on the roads," he continued.
As for now, it's just a matter of waiting until the coronavirus pandemic passes before consumers and industries can see the true impact the virus will have on the oil industry.
