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Greenville Business Magazine

U.S. Gas Prices Drop As Demand Plummets

Apr 07, 2020 05:58PM ● By David Dykes

By David Dykes

A silver lining to the coronavirus pandemic?

Gas prices are falling as demand weakens and it’s putting more money in your pockets in a couple of different ways.

The national gas price average was $1.92 on Monday, or nine cents cheaper than a week earlier, 48 cents less than a month ago and 81 cents less expensive than a year ago, according to AAA.

On the week, gasoline demand registered its lowest point since 1993, AAA officials said. The federation of motor clubs said it’s likely to push lower as Americans are urged to stay home.

South and Southeast state gas price averages were lower by six to 10 cents, according to AAA.

Arkansas and Mississippi saw the largest regional declines at 10 cents. Regional averages ranged as low as $1.48 in Oklahoma to a high of $1.90 in Florida.

Motorists were saving as much as 36 to 65 cents compared to a month ago and 67 cents to more than $1/gallon compared to a year ago.

Meanwhile, the U.S. refinery utilization average was down to 82 percent, a low not seen since September 2017, AAA officials said.

Given the drop in crude oil and gasoline demand, refineries are reducing production in hopes they could help balance the nation’s gasoline supplies, the officials said.

Less driving also has prompted one major insurer to act.

Allstate said Allstate, Esurance and Encompass personal auto insurance customers will receive refunds totaling more than $600 million.

“Allstate has been helping customers overcome catastrophes for 89 years since our purpose is to make sure they are in Good Hands. We have learned to move quickly and put people first,” said Tom Wilson, chairman, president and chief executive officer. “This crisis is pervasive. Given an unprecedented decline in driving, customers will receive a shelter-in-place payback of more than $600 million over the next two months. This is fair because less driving means fewer accidents. We are also providing free identity protection for the rest of the year to all U.S residents who sign up, since our lives have become more digital.”

As part of the payback, most customers will receive 15 percent of their monthly premium in April and May, Allstate officials said.

Customers will receive the money back through a credit to their bank account, credit card or Allstate account, the officials said. They said the fastest way for customers to receive the refund is by using Allstate's mobile app.

Since shelter-in-place orders require working at home, taking classes and visiting friends virtually, increasing exposure to cybercrime, Allstate said it is making its identity protection free for the rest of the year with no opt-out-requirement.

The company said. U.S. residents can get free identity protection through Dec. 31, 2020, regardless of whether they are Allstate customers, by signing up in April or May.

The company’s special payment plan gives auto and homeowners insurance customers the choice to delay two consecutive premium payments.

Further, Allstate said it is expanding insurance coverage for customers who use their personal vehicles to deliver food, medicine and other goods for commercial purposes. Standard personal auto insurance policies typically exclude that coverage, company officials said.

The overall pandemic climate remains worrisome, to say the least.

Economists and analysts at Wells Fargo Securities reported the NFIB Small Business Optimism Index, which was conducted in the first half of March, fell 8.1 points as vast portions of the economy shut down to stem the spread of COVID-19.

The drop in confidence reported in March was the largest in the survey’s history, as nine of the 10 components fell and the uncertainty Index rose 12 points, the economists said.

Business owners were clearly already very concerned about the virus’s impact, they said. Expectations of higher real sales over the next six months declined 31 points, the largest decline on record, while expectations of better overall business conditions in the next six months fell 17 points to 5 percent, according to the economists.

Twenty-six percent of owners reported delaying payments to creditors, while 29 percent talked to either their bank or the Small Business Administration (and 23 percent more plan to do so), the economists said.

They said two-thirds of small businesses plan to apply for the Paycheck Protection Program (PPP), which provides up to $349 billion in loans to cover about two months of essential expenses that will be forgiven if the proceeds are used to maintain payrolls.

The Fed also announced a facility to provide term financing backed by PPP loans, which aims to free up bank balance sheets to extend additional credit to the most affected sectors of the economy.

The economists said small businesses are bearing a disproportionate part of the burden from stay-at-home orders, and providing timely relief is critical to heading off a surge of business failures that would make the subsequent economic recovery much more difficult.