Gas prices across the Northland have fallen below $2 per gallon amid an oil price war and lower demand caused by the COVID-19 stay-at-home orders.

On Thursday, M&H in Duluth was selling gas for $1.85 per gallon while the Wrenshall General Store reported a price of $1.66 per gallon and Kimmes Tire in Superior had $1.59 per gallon.

In the Twin Cities on Wednesday, gas even fell below $1 per gallon at some stations.

It’s the result of an oil production war between Russia and Saudi Arabia flooding the market with oil and a drop in demand as residents hunker down to slow the spread of COVID-19, said Patrick De Haan, a petroleum analyst at GasBuddy.

“If you’re adjusting for inflation, (Tuesday’s) closing price of Chicago spot gasoline would be the equivalent of that same gallon selling for at a penny per gallon in 1939,” De Haan said. “Legitimately, we’re looking at the possibility of all-time inflation-adjusted lows for gasoline. I mean, how ridiculous is that?”

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Most states have ordered residents to stay at home or shelter in place to curb the spread of COVID-19, the respiratory illness caused by the new coronavirus.

That means fewer people are driving. In Minnesota, for example, statewide traffic volumes were down 38% on Wednesday and down more than 54% over the weekend, according to the Minnesota Department of Transportation.

Across the U.S., gasoline demand fell to 6.6 million barrels per day last week, the lowest level since 1994, according to data collected by the U.S. Energy Information Administration.

But on Thursday news emerged that a deal to end the Russia-Saudi Arabia oil war could come to an end and production could be cut, the Wall Street Journal reported.

It might take months for the prices to return to normal levels because production is continuing, inventories are filling up and it will take time for that glut to be used, De Haan said.

“Whenever we do start to get back to normal, whenever people start going back to work, whenever the coast is clear, I’m sure prices will start to go back up because demand will start to return,” De Haan said.

Potential impacts on Enbridge, Husky

The collapse in oil prices has Western Canadian Select prices down to $5 per barrel on Wednesday, with many pointing out that a barrel, or 42 gallons, of oil from Alberta’s oil sands is now cheaper than a pint of beer or even a Barrel of Monkeys.

Enbridge, with a series of oil pipelines running from the Alberta to Superior, is looking to replace its aging Line 3.

While Canadian and Wisconsin segments of Line 3 are already in service, the Minnesota segment, which would follow a different route through much of the state, still needs several permits before construction can begin, including a water permit from the Minnesota Pollution Control Agency. The MPCA is currently weighing the permit and is taking public comments through April 10.

In a March 26 letter to Gov. Tim Walz, Michael Fairbanks, chairman of the White Earth Band, urged the Minnesota governor to direct the MPCA to reject the permit and cited low oil prices.

“Our important off-reservation treaty protected natural resources that are critical to support our rights to hunt, fish, trap and gather are facing unnecessary regulatory risk when the coronavirus is speeding the fall of oil prices,” Fairbanks wrote.

In an emailed statement to the News Tribune, Enbridge spokesperson Juli Kellner said the company continues to ship oil along its Mainline to North American refineries that need it.

“We have not seen a material change in demand on our liquids system due to the COVID-19 pandemic,” Kellner said. “Space on the Mainline is nominated on a monthly basis and we’re watching to see if there is a change in demand for that space.”

And Enbridge can weather a downturn, she said.

“Enbridge has thrived in tough markets, like previous financial crises, and many commodity downturns like today,” Kellner said. “We do not own the crude oil that travels through our pipelines, our job is to safely move it where it needs to go.”

De Haan said pipeline companies could feel the effects later.

“A lot of these shipments have been allocated weeks ago, before this whole situation started, so it will affect the future, but it probably won't affect them now,” De Haan said.

As for the refineries supplied by the pipelines? They’re relying on diesel demand with higher prices, De Haan said.

“Diesel is the only thing keeping refineries in business right now … a lot of refiners are going to throttle back in the days and weeks ahead, because there's just no demand. Refineries are tilting as much as they can to produce as much distillate fuel, heavy fuel, diesel, and they're probably tweaking gasoline demand down as far as they can now.” De Haan said.

Last month, Husky Energy suspended the $750 million rebuild of its Superior refinery, damaged in a 2018 explosion and fire, over COVID-19 concerns.

But the Canadian oil company is facing its own set of challenges caused by lower oil prices.

Earlier this month, Husky announced it was cutting $1 billion from spending this year “in response to challenging global market conditions.”

Asked if the low oil prices could delay the construction and restart of the Superior refinery, Husky spokesperson Kim Guttormson said, “We’ll be evaluating plans on how we‘ll resume the work at a later date, in consultation with our unions and contractor partners. We continue to closely monitor and evaluate both the evolving COVID-19 situation and market conditions.”