Gasoline Is Selling for 12 Cents a Gallon and Nobody Wants It

(Bloomberg) -- In Fargo, North Dakota, cheap fuel has never been so unwelcome.

The Midwestern city is so awash in gasoline, the fuel last week sold for a record 12 cents a gallon at the rack -- its last stop before the pump. In better times, the price dip would be a boon for gas station owners looking to snag low-cost supplies. But with fewer customers every day, gas pumps are becoming little more than makeshift storage for ballooning inventories.

“Our gasoline business has been cut in half,” said David Olson, general manager at family-owned RJ’s Gas Station near Fargo. Across town, Shaun Lugert estimates that sales at the station he owns have tumbled 80% in a month. “The biggest part for us that has been so hard is the unknown,” he said by phone. “It’s been kind of a roller coaster.”

The slump in rack prices, which are typically stable due to intense competition among distributors, is the latest sign that the coronavirus pandemic is wreaking havoc on every aspect of the fuel market. American gasoline consumption fell to the lowest level on record last week as lockdowns take drivers off the road while gasoline stockpiles rose to a record high. That’s caused rack prices across the U.S to collapse. Milwaukee this week beat out Fargo for the lowest price in the nation.

Gasoline Is Selling for 12 Cents a Gallon and Nobody Wants It

“The local racks are just inundated with material,” said Patrick De Haan, head of petroleum analysis at GasBuddy. Some refineries may even be selling gasoline “at a break even or even a loss,” he said.

The price decline is especially pronounced for cities at the end of pipeline systems, such as Fargo and Milwaukee.

“Those places are at the end of the line,” said DTN refined products analyst Brian Milne. “What we are seeing is that a lot of the big pipelines are being used as storage, and the product will just get pushed and pushed until it has no place else to go.”

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While everyone along the supply chain is getting hammered right now, gas stations may have it the worst.

Gasoline Is Selling for 12 Cents a Gallon and Nobody Wants It

“When you see gasoline down around 12 cents a gallon, no one is going to be making money,” said Ron Ness, president of the North Dakota Petroleum Council. For retailers, it’s nearly impossible to turn a profit, he said.

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Lugert, the co-owner of Don’s Car Washes, has been forced to cut back store and worker hours, with no apparent end in sight.

“You’re not going to be able to flip a switch and go back to what it was before coronavirus,” said station manager Olson. “Even with businesses opened back up again, people are going to be apprehensive.”

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