Petrol now cheaper, just when Americans are not needing it

New York

AT two petrol stations in Scarsdale, a wealthy suburb of New York City not far from one of the nation's worst outbreaks of Covid-19, attendants whiled away the minutes on a rainy Friday morning at what would normally be their busiest time of day.

"We've had one or two customers - that's it," said Julio Barrios as he sat under an umbrella at the full-service Shell station in downtown Scarsdale. "For more than a week, business has been slow."

The novel coronavirus has infected at least 138,000 people worldwide and killed more than 5,000, rocking the global economy.

As cases steadily grow across the United States, Americans are cancelling road trips, running fewer errands and finding they don't have to drop their children off at school following widespread closings. The irony is that drivers are parking their cars at a time when petrol is more affordable, which usually spurs more driving.

The average price for a gallon of petrol is US$2.28, the lowest since 2017, according to the American Automobile Association. The US consumes more than 20 million barrels of oil and petroleum products daily, the most worldwide, and petrol accounts for nearly half of that, at about nine million barrels a day.

But the Covid-19 outbreak's effect on driving activity is expected to be drastic. "We would estimate commuting and leisure driving will be down by up to 50 per cent, with most impact in the northern states where the virus spreads faster now," said Per Magnus Nysveen, senior partner at Oslo, Norway-based energy research firm Rystad Energy.

That could sap fuel demand by roughly 2 to 2.5 million barrels per day (bpd), he said, and for 2020, that would cut demand by roughly 300,000 to 400,000 bpd.

The reasons for the sharp fall in prices aren't just due to the novel coronavirus.

A week ago, an oil price war erupted between Saudi Arabia and Russia after those nations were unable to come to a deal to cut supplies in response to the anticipated drop in demand due to the virus.

Instead of curbing supply, Saudi Arabia and other nations are flooding global markets with barrels of crude oil.

US crude oil prices, which account for about half of the price of retail petrol, dropped to about US$31 per barrel last week, the lowest since 2016.

Some US states have seen average petrol prices fall by more than 10 cents in the last week. Savings on low petrol prices are usually referred to by lawmakers as "like a tax cut", but for the moment, Americans are seeing that they can pocket savings just by not driving at all.

"I will have zero driving requirements for two weeks (minimum) now that everything is shutting down," said Cathy Martin, of Potomac, Maryland. "For me, my average weekly work and kid activity driving is 241 km."

Industry analysts said consumers can expect cheaper petrol prices for the foreseeable future, even with the approach of the summer driving season, when prices tend to climb along with demand.

US petrol futures fell to US$0.8536 a gallon on Friday, lowest seasonally since at least 2005, Refinitiv Eikon data showed. The average American's motor petrol expenditures were US$1,072 in 2017, the latest data available, according to the US Energy Department. That total varies by state, from as little as US$708 in New York to a high of US$1,441 in Wyoming.

But some Americans spend much more than that due to lengthy commutes, like Jamie Niederkohr of Toledo, Ohio, who normally drives up to 322 km a day related to work as a data collector. Her husband has a 114-km per day commute. "I figure we could save over US$200 a week (on petrol)," she said. REUTERS