At the least, there is one minor positive for consumers from the one-two punch of the coronavirus outbreak and Saudi Arabia’s surprise decision to slash oil prices.
Ridiculously cheap gas prices at the pump, and perhaps soon.
Deutsche Bank chief economist Torsten Slok pointed out in a note Tuesday retail gas prices are on the verge of touching $2 a gallon. Prices haven’t been this cheap since early 2016 when they broke through the $2 a gallon level.
Nationwide gas prices have plunged about 15% year-to-date to $2.36 a gallon, according to data from GasBuddy.
Breaking the key $2 level looks all but certain right now.
Similar to 2016 when oil prices crashed about 70% due to a supply glut, conditions are equally as precarious.
Oil prices cratered more than 20% on Monday following Saudi Arabia’s decision over the weekend to slash prices. At one point Sunday evening, crude oil futures were down about 40%.
Prices for crude rose 8% or so today after Monday’s dive, but nervousness in the market no doubt persists.
“A huge drop would have to happen to get the national average to fall to or below two dollars per gallon. That may not happen. But, many states will doubtlessly get below the $2 level given average prices today,” AAA spokesperson Robert Sinclair told Yahoo Finance via email.
Nevertheless, consumers are primed to experience a major financial tailwind this spring due to lower gas prices. That could very well spur consumer spending once households move past the worst of the coronavirus.
“Oil prices lower is inflationary, this is not a deflationary event. Oil lower promotes consumer spending, puts more money in their pockets,” strategist Michael Lee of Michael Lee Strategy said on Yahoo Finance’s The First Trade.