In 2016, drivers in every section of the country enjoyed some of the lowest prices at the pump since 2004, according to the U.S. Energy Information Administration (EIA). In fact, per-gallon prices haven't topped $3.00 in 9 of the 10 cities in which the EIA collects weekly data on gasoline prices.
Price fluctuations within the year, for the most part, followed the usual patterns – with yearly lows coming in February, and yearly highs coming in the summer months – when demand is high and seasonal gasoline blends, pricier. Yet even with these variations, 2016 marked the fourth straight year of declining gas prices.
Will lower prices last?
The factors that affect gas prices are complex and varied. And while the per-barrel price of crude is a key factor, gas prices are also affected by things like:
- Refinery and pipeline issues
- State and local taxes
- Supply and demand
- A state’s specifications for gasoline sold within its borders
- Geopolitical instability
Whether or not prices remain low depends on a mix of these factors, some of them unpredictable.
The California difference
Drivers in California typically pay more for gas than anywhere else in the U.S., mainly because of the state’s requirements for an environmentally stringent mix of gasoline. This, coupled with the region’s relative isolation from other refineries, plus higher state and local taxes, means that the lower gas prices enjoyed in other areas of the country are something Californians can only dream about.
In 2016, for instance, the price in the U.S. for a gallon of regular was averaging $2.14. But in January of that year, drivers in the Los Angeles area paid $3.11 per gallon – due, in part, to a series of refinery outages along the West Coast, most notably, the production outage at the refinery in Torrance, California, which produces up to 10% of the special mix of eco-friendly gasoline the state requires.
This is in stark contrast to the prices on the Gulf Coast, home to some of the lowest gas taxes in the country and the site of nearly half of the U.S. refining capacity. According to the EIA, gas prices there – ranging from a mid-June high of $2.10/gal to a February low of $1.45/gal - were the lowest of the 10 major cities for which the EIA collects price data each Monday.
The main reason for low gas prices
The robust supply of oil was the main factor in keeping gas prices low in 2016. Gas prices are directly tied to the wholesale price of crude, which in early 2016 dipped below $30 per barrel. But even though there’s the expectation that per-barrel prices will climb, average prices for gas in 2016 were around 40-cents per gallon cheaper than they were in 2015 – even in California. And more than a dollar cheaper than they were from 2012 to 2014.