The Miracle of $2 A Gallon Gas Prices

Economics: What seemed like an impossibility just a few years ago is now a reality for many across the country: gasoline that costs less than $2 a gallon. It’s amazing for many reasons.




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USA Today reports that almost one in five gas stations in the country are charging less than $2 a gallon. As many as eight states could soon have an average price of under $2, the paper said, citing data from GasBuddy.

The national average for gasoline last week was under $2.40, according to the Department of Energy. In the Midwest and the Gulf Coast, it’s barely above $2.

$2 a Gallon in Context

Let’s put that in some context. First, there was a time not too long ago when President Obama insisted that $2-a-gallon gas was a thing of the past. “We can’t just drill our way to lower gas prices,” was his constant refrain.

Earlier this year, Democrats made hay when gas prices neared $3 a gallon. Senate Minority leader Chuck Schumer blamed “President Trump’s reckless decision to pull out of the Iran deal.” He said it caused “soaring gas prices, something we know disproportionately hurts middle- and lower-income people.”

Last we checked, Schumer wasn’t crediting Trump for today’s low prices.

And gas prices are low. Almost unbelievably so. At $2 a gallon, they are as low as they were back in 1986, after adjusting for inflation.

Today’s low prices look even more remarkable when you compare them to other common liquid commodities.

A Bargain At Twice the Price

The nationwide average price for a gallon of milk, for example, is $2.61, according to the U.S. Department of Agriculture. Walmart sells a 24-pack of bottled water at the equivalent of $3.14 a gallon. A generic gallon of orange juice costs $3.44 a gallon. A gallon of eggnog is $7. A gallon of honey, $20.

Printer ink is roughly $3,000 a gallon. And if you had to fill your tank with Chanel No. 5, it would cost around $10,000 a gallon.

Now consider what it takes to bring gasoline to the pump and sell it for $2 a gallon. (And, keep in mind that federal and state taxes account for 30 cents of that price, on average.)

First, there’s the problem of finding it, which requires laborious and costly exploration. Then there’s the challenge of getting it out from under miles of earth and rock using high-tech drilling technology. That’s to say nothing of the added challenges of recovering offshore oil.

Next, the oil has to be shipped — often thousands of miles — to refineries located in three areas of the country. And from there, distributed by pipeline and truck to gas stations across the country.

The fact that this product ever sells for less than $2 a gallon is one of the best — and least appreciated — examples of the benefits of a free market there is.

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