Gas prices in Chattanooga fell this week to the lowest level since 2008, but the ongoing plunge in oil prices Monday virtually ensures that gas prices will drop even more this month.
The new year sell-off in oil markets quickened on Monday, with prices plunging another $1.75 per barrel, or 5.3 percent, to $32.41 a barrel in New York. That was the biggest one-day slide in oil prices since last September and left wholesale oil prices at their lowest level since December 2003.
Prices were pushed down by investor worries about the slowing pace of China's economic growth rate and a continued glut of crude oil supplies.
"Investors have one eye on China, and all that's going on there, and the other eye on oil," said Erik Davidson, chief investment officer at Wells Fargo Private Bank. "Those two things are keeping investors on pins and needles right now."
Morgan Stanley analysts predict oil could drop as low as $20 a barrel because of the strengthening U.S. dollar and weakening energy demand.
"Given the continued U.S. dollar appreciation, $20-$25 oil price scenarios are possible simply due to currency," analyst Adam Longson wrote in a Morgan Stanley report released Monday. "The U.S. dollar and non-fundamental factors continue to drive oil prices."
Average gas prices in Chattanooga fell another 1.8 cents per gallon in the past week to $1.66 per gallon for regular gas, according to GasBuddy's daily survey of 170 gas outlets in Chattanooga.
Chattanooga gas prices are now at their lowest price since October 2008. The average price of regular gas in Chattanooga at the start of this week was 31 cents per gallon below the national average of $1.97 per gallon.
Gas prices dipped Monday to $1.54 per gallon at the Sam's Club station outside of the Walmart store on Lee Highway — the lowest price in the region, according to GasBuddy.com.
Including the change in gas prices in Chattanooga during the past week, Chattanooga gas prices averaged 26.4 cents per gallon lower than the same day one year ago and 5.4 cents per gallon lower than a month ago.
"The first week of January seems to be on par with prior years," said Jeff Pelton, GasBuddy senior petroleum analyst. "History has shown that 12 of the past 16 Januarys have yielded the worst demand for the year. "
Pelton said the while the tension between Saudi Arabia and Iran would normally push pries higher, "the times have changed and the incentive now is for the Saudis to pump away and keep Iran's coffers as empty as they can."
"Add to the mix the turmoil in the Chinese financial markets which has roiled the US stock market and you should get gas prices which will decline through the month," he said.
Long-term futures contracts for oil in 2017 and beyond also fell Monday as some producers rushed to hedge against further declines.
Although motorists are saving money from cheaper gas prices, the drop in oil prices pushes share of Chevron down 1.7 percent and Exxon Mobil down 1 percent in trading Monday on the New York Stock Exchange.
The Associated Press contributed to this report
Contact Dave Flessner at firstname.lastname@example.org or at 757-6340.
Updated Jan. 11 at 11: 30 p.m.