A bus driver fills up at a gas station in Brooklyn on August 11, 2022 in New York City.
Spencer Platt | Getty Images
Labor Day marks the end of the summer driving season. Although gas prices are high, the US avoided the super high price stretch that some had feared.
Gasoline prices are expected to continue their more than two-month decline over the three-day holiday weekend as Americans drive less and continue to conserve fuel.
Prices have been falling since the national average for unleaded gasoline peaked at just under $5.02 a gallon on June 14. The price at the pump Monday was $3.79 per gallon nationally, according to AAA.
“I think the good news will continue for now,” said Patrick DeHaan, head of oil analysis at GasBuddy. Gasoline prices should continue to fall into the fall, barring a disruption in refining, he noted.
The US Gulf Coast is home to a significant amount of US refining capacity.
“I’m hoping we can get to $3.49 between Halloween and Thanksgiving,” DeHaan said. He added that there is an outside chance that the national average will reach $3.29, barring a major Gulf Coast hurricane or more refinery outages.
He warns that the decline could temporarily slow and even increase in some areas, such as California and the Midwest. Prices rose on the spot market in these areas on Friday.
He said one reason could be that BP’s Whiting, Ind., refinery in Indiana was down for a week. BP said the 435,000-barrel-a-day refinery was back to normal on Friday. The refinery processes 435,000 barrels per day.
“I still think we could see some states go below $3, mainly Oklahoma, Texas by the end of the year, if not sooner,” he said.
The least expensive states for gas are in the South. According to AAA, drivers were paying an average of $3.26 per gallon of unleaded in Texas and Arkansas on Monday and $3.28 in Mississippi. Some states continue to see much higher prices, such as California, where the average is $5.26 per gallon, and Nevada at $4.84.
“Consumers have been incredibly lucky. All the worst fears have not materialized,” said John Kilduff, partner at Again Capital.
“This is putting a lot of money back in people’s pockets,” he added. “It provides relief to people and relief to the economy. It’s like a huge tax break for consumers.”
More downloads ahead?
Tom Kloza, head of global energy analysis at the Oil Price Information Service, expects prices may drop, but not by much, and could even rise again toward the end of the year.
“On balance, prices will be relatively nice for the rest of the year,” he said. Kloza said nationally the slump is coming to an end and prices could average $3.50 to $3.75 per gallon.
“There are too many things that could cause higher volatility,” he said. He said Friday was the 80th day of falling prices, but that trend could stall. He pointed to higher prices in the wholesale market on Friday.
Another factor Kloza points to is the fact that the US has become a larger exporter of oil and refined products, helping to keep prices up.
The US exported nearly 10 million barrels of oil and refined products last week, according to the US Energy Information Administration. Gasoline exports totaled 1 million barrels per day during the week, compared to 466,000 barrels per day in the same period last year. Exports of distillates, which includes diesel, reached 1.5 million barrels per day.
The price of oil also remains a wild card for the gasoline market, and geopolitical events could trigger another spike at any time. Oil prices soared toward $130 a barrel in March when Russia invaded Ukraine, but West Texas Intermediate crude futures were trading just above $90 a barrel on Monday.
A tamer market than expected
The market has been much tamer than some analysts expected. “We haven’t actually lost any Russian oil. It’s being diverted to India and China,” Kilduff said. “In this week’s Iraqi turmoil, none of the oil production was affected.”
OPEC+ surprised the oil market on Monday by announcing that the association would cut production by about 100,000 barrels a day starting in October. Last month, the group that includes OPEC and other non-OPEC producers, including Russia, increased output by the same amount.
The move adds more uncertainty to a market that could become more volatile as European countries reduce their use of Russian crude in December.
But on the other hand, oil prices have been weakened by concerns about China’s economy and that nation’s latest Covid lockdown could weigh on demand.
Analysts say high prices at the pump have simply been a panacea, resulting in less driving by consumers. In the US, demand for gasoline has dropped significantly this summer, according to EIA data.
US gasoline demand was 8.6 million barrels per day for the week ending August 26. The four-week average was 8.9 million barrels per day, well below the 9.5 million barrels in the same period last year.
In a July survey, AAA found that nearly two-thirds of respondents said they changed their driving habits because of high gas prices, and 88% of them said they drove less.
“OPIS data has shown that demand is down 6%, 7% below last year throughout July and August,” Kloza said.
He said a hurricane could be a factor for the industry, but so far no major storms have affected Gulf operations.
The hurricane season has yet to result in any major shutdowns along the Gulf Coast, and storms headed for the East Coast are likely to create less demand for power, rather than outages.