At times Tuesday morning, the line of vehicles waiting to gas up at the Nisqually Market Shell station in Lakewood extended briefly out onto Pacific Highway Southwest.
The attraction, posted in bold illuminated numbers on the gas station’s sign near the highway, was obvious. Regular unleaded gasoline was selling for $2.289 a gallon, the lowest price in the South Sound.
The queue of cars and the price are emphatic illustrations of a phenomenon the South Sound and the nation hasn’t seen in more than four years — swiftly dropping gas prices. Average gas prices have fallen from a summer high of $4.03 recorded during the Independence Day holiday to an average of $2.784 Tuesday afternoon in the South Sound, according to TacomaGasPrices.com. That’s 54 cents a gallon less than at this time last year.
The speed and depth of that decline are surprising even to petroleum industry professionals who’ve watched the gasoline market’s gyrations for years.
A month ago, the average price of a gallon was some 27 cents higher than it is now in the region stretching from South King County through Olympia. In the past week alone, average South Sound prices have fallen by 16 cents a gallon, according to the price-watching website.
At stations such as the Nisqually Market, where high volumes of business have sold out supplies of higher priced gas quickly, the price drop has been even quicker. Just a week ago, the station owned by the Nisqually Tribe of Indians had been selling gas for $2.559 a gallon, 27 cents higher than Tuesday’s price.
More than a dozen Tacoma-area stations, many of them in Lakewood where a gas war has broken out, were selling gas Tuesday for less than $2.35 a gallon.
The price is likely to go even lower, said Frank Pupo Jr., executive vice president of Associated Petroleum Products, one of the area’s leading gasoline distributors.
“Our price for gasoline is now under $2 a gallon — well under,” he said. “As stations sell out of their higher priced inventory and replace it with lower priced supplies, the price is likely to drop further.”
While the lower prices now prevalent both in the South Sound and the nation — national prices now average $2.506 a gallon — may not bring joy to energy company headquarters in Houston and Dallas or to farmers in North Dakota leasing their oil rights for a share of the sale price of the crude recovered from beneath their land, consumers, businesses and gas station owners alike are pleased.
Jason Boring, who was filling up his big truck at the Nisqually Market on Tuesday morning, said his bill for a fill-up has dropped from $100 or more to $64.
Mark Horace, who commutes from his family’s home in Puyallup to DuPont for work, said the savings on a 19-gallon fill will put more Christmas presents under the tree this year.
The Nisqually Market is so consistently busy that the station gets a daily 10,000-gallon resupply, said Martie Aarhies, the station manager. On some busier days, the station sees two 10,000-gallon trucks full of gas to supply its pumps.
The station employs an attendant, Matthew Hedland, to ensure that the traffic moves smoothly through the station. Hedland directs traffic, helps some customers filling their tanks, takes their cash into the station to the cashiers and even washes windows when the traffic ebbs.
His services are free to customers, though he receives occasional tips from patrons.
Consumers aren’t the only ones happy to see the price declines. Tim Hamilton, director of Automotive Trades United Organization, which represents Washington service station owners and operators, said the price dips are a boon for gas station operators.
“The dealers are just doing handsprings,” said Hamilton.
Declining prices give dealers a greater opportunity to make money on each gallon, he said, because of lower credit card costs (credit card companies charge a fixed percentage of the total sale price) and lower replacement costs for new supplies of gas.
Associated Petroleum’s Pupo said the lower wholesale prices ease the credit tension on gasoline dealers. With declining prices, each new load of gas costs the dealer less than the last. That’s not the case when prices are rising when each new supply costs more than the last, forcing the station owner to borrow money to pay for it.
The force behind the dropping prices is an oversupply of gasoline. That oversupply is driven in part by higher U.S. production of crude oil coupled with the Organization of Petroleum Exporting States’ decision to keep its production at current levels.
That glut has forced crude oil prices, which were more than $100 a barrel in midsummer, down below $60 a barrel now. Some experts say that price may drop as low as $45 a barrel before it begins to rebound.
Those low prices are putting more money in the hands of business people who use fuel to deliver their goods and conduct their businesses.
At SeaTac’s Alaska Airlines, for instance, the airline has seen its cost of fuel fall by more than 17 percent this year to $2.67 a gallon. For every cent that the price of jet fuel declines, Alaska says it cuts its operating costs by $4.5 million.
The declining cost of fuel has helped make the airline industry one of the best performing industry groups in the stock market this year.
Airlines are expected to collectively report profits of $13 billion this year.