Coronavirus causes 'unprecedented' drop in fuel demand

$1.85 average price per gallon; likely to remain under $2 through summer

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Americans are driving less, and that has led to a glut of gasoline.

GasBuddy released its first quarterly report on Wednesday, which found that demand in gallons of gasoline purchased in the United States declined 20 percent last month when compared with the same period last year -- bucking seasonal trends.

There was a 9 percent decline in gallons pumped during the first three months of the year.

And a recent deal struck by countries known as “OPEC plus” to cut global oil production by record amounts is only a “Band-Aid,” Patrick DeHaan, a senior petroleum analyst at GasBuddy, told FOX Business.

“Even if oil does see some sort of rebound then the problem still exists for refiners that millions of Americans are parked,” DeHaan said. “Prices are going to remain depressed for several months if not longer -- it could last six to 12 months -- until all this gas that’s still being turned out is absorbed by the market.”

Light traffic is seen on Highway 101 in San Francisco March 29 amid coronavirus concerns. (AP Photo/Jeff Chiu)

The declines in gasoline demand were attributed to stay-at-home orders, which have kept Americans out of their cars and off of the roads despite low gas prices.

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The national average fuel price as of Tuesday was $1.85 per gallon, according to AAA. That is down from $2.28 one month ago and $2.82 one year ago.

Meanwhile, West Texas Intermediate crude was trading around $20.70 per barrel – down significantly from where it started the year (around $60.00 per barrel) as demand falters around the world.

Crude oil is the main component of gasoline, making up nearly 70 percent of the pump price of regular gas. That is why the price of gasoline mirrors movements in oil prices.

The good news for drivers -- and bad news for refiners --  is that demand is unlikely to rebound anytime soon.

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Total motor gasoline inventories rose by 10.5 million barrels for the week ending April 3, and that excess is 10 percent above the five year average for this time of year, according to the Energy Information Administration. Crude oil inventories increased by 15.2 million barrels.

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Those inventories are likely to continue to rise, which will keep prices at the pump low for a while.

This summer, DeHaan predicts the country will “struggle” to see the national average hit the $2 per gallon mark.

There are additional concerns that even when the economy does begin to reopen, people may be hesitant to get in their cars and take trips, or to travel to local spots in densely-populated areas because of health care-related risks.

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