Two weeks ago we reported how the "steepest decline in global oil consumption ever recorded" spelled negative prices for crude in what Goldman's Jeffrey Currie as "the largest economic shock of our lifetimes."
Now, the unprecedented collapse in consumption has hit the other end of the industry - gasoline.
According to Bloomberg, gasoline in Fargo, North Dakota has hit 12 cents a gallon at 'the rack' - the wholesale market where gas station owners buy fuel before marking it up at the pumps - which have become "little more than makeshift storage for ballooning inventories."
"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, who added that it's nearly impossible for retailers to turn a profit at that price.
"Our gasoline business has been cut in half," said David Olson, general manager of RJ's Gas Station outside of Fargo. Nearby, Shaun Lugurt told Bloomberg that he estimates sales at his station have tumbled 80% in a month.
"The biggest part for us that has been so hard is the unknown," said Lugurt, adding "It's been kind of a roller coaster." Lugert co-owns Don's Car Washes, and has also been forced too cut back store and worker hours.
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. -Bloomberg
"The local racks are just inundated with material," according to Patrick De Haan, head of petroleum analysis at GasBuddy - who suggested that some refineries may be selling gasoline "at a break even or even a loss."
"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," said DTN refined products analyst, Brian Milne. "Those places are at the end of the line."
Retail gas prices, meanwhile, are catching up.
"You’re not going to be able to flip a switch and go back to what it was before coronavirus," said Olson, the station manager at RJ's. "Even with businesses opened back up again, people are going to be apprehensive."
Olson is probably right - as a recent Gallup poll found that 80% of Americans say they will wait to return to normal activities after the government lifts the nationwide coronavirus lockdown.