NewsLocal News


Gas prices continue to drop as Utah oil industry takes hit amid price war, pandemic

Posted at 10:40 PM, Apr 20, 2020
and last updated 2020-04-21 00:51:44-04

UTAH – For the first time in history, oil prices have dropped into the negatives, causing lower pump prices and potential problems for Utah’s oil industry.

Pulling up to the pump, paying and filling up – it’s a process most drivers have done time and time again, but it has been years since Utah drivers have seen gas prices as low as they are now.

According to, the state average is floating right around $2.08 a gallon, a price that has not been seen since around this time in 2016.

The cheapest gallon of gas can be found in Salina, Utah, ringing in at $1.13/gallon. Meanwhile, the cheapest in Salt Lake City, is floating around $1.78.

“We’ve been the number one oil producing nation in the world for a couple of years now and that’s been good for the American consumer because nobody’s complained about prices at the pump for quite some time,” said Kathleen Sgamma, President of the Western Energy Alliance, a nonprofit trade association representing more than 300 oil and natural gas producers in Utah and across the west.

While the price drop may be good news for consumers, for manufactures and producers it’s a different story.

“You’ll see prices remaining low for consumers for quite some time, but it will harm potentially thousands of people particularly out in the Uintah Basin, Vernal, Roosevelt, Duchesne and Uintah counties, our major oil and gas producing areas,” said Sgamma.

Sgamma said the drop in price and impact to U.S producers initially started amid a price war between Saudi Arabi and Russia, in which an influx of oil was released onto the global market, sending prices plummeting.

“It’s a blood bath right now,” Sgamma said. “Saudi Arabi released just a glut of oil on the world market, so it’s good news for consumers because the price at the pump is low, but what it’s really designed to do is take out the American producer.”

Exactly how low is the per-barrel price of oil? For the first time in history, it is in the negatives. Meaning you could buy a bottle of water – or anything for that matter, and it would cost more.

“We have a situation where we can’t even produce American oil because it costs more money to produce it than you’re going to get in, then that just makes the industry collapse and that will kill potentially millions of jobs across the country,” Sgamma said.

For Utah, a state that has consistently ranked among the top 15 oil producers in the United State, that’s roughly 10-thousand employees directly related to the oil industry.

“We have producers in Utah and across the west that have been feeling the strain of a price war.”

On top of pricey production, there is a Coronavirus-fueled lack of demand as people have stopped traveling by air and land, to try to limit the spread of COVID-19.

“World demand for oil is down somewhere between 20 and 30 million barrels of oil a day,” said Sgamma. “As a result, we’ve got huge pressures on the industry in Utah and across the country.”

The other issue? Storage.

“We don’t have enough storage to store all the oil that we can’t sell, so we’re really tapping up storage capacity and when that runs out, operators [will] have to shut in their wells, literally stop the production from those wells, and wait for prices to bounce back and it’s going to take a long time when prices are this low and there’s so much in storage,” Sgamma said.

Mix it all together, it’s a situation we’ve never seen before.

“It’s a major industry in Utah, luckily Utah’s economy is diversified, [but] it will unfortunately cause a loss of jobs in Utah,” said Sgamma.

President Trump worked out a deal with OPEC to get Saudi Arabi and Russia to pull back some of their production. Sgamma hopes that deal, in combination with storage expansion and shutting in some U.S productions, could put the country’s oil industry on the right path, while keeping prices low for the consumer.

“As we come out of the Coronavirus crisis, we’ll see demand increase across the globe for oil,” said Sgamma. “We will see that rebound when we all can come out from sheltering in place, but it’s going to be a long time before we get through the glut in the world market and what’s in storage, before we really see a recovery on this industry.”

So, for now gas prices are low – but it could be a long road to recovery.

“It will slowly start to recover, I don’t think we’ll really recover until we see the economy get back to normal from Coronavirus.”