A bus driver fills in 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. While gas prices have risen, the US avoided the pull of extremely high prices that some feared.
Gasoline prices are expected to continue falling for more than two months over the three-day holiday weekend, as Americans drive less and continue to conserve fuel.
Prices are falling as the national average for unleaded gasoline peaked at less than $5.02 a gallon on June 14. On Monday the price of the pump was $3.79 a gallon nationally, According to AAA.
“I think the good news is just going to continue,” said Patrick DeHaan, head of petroleum analysis at GasBuddy. Barring refining disruptions, gasoline prices should continue to fall, he said.
The US Gulf Coast is home to a significant amount of US refining potential.
“I hope we can get $3.49 between Halloween and Thanksgiving,” DeHaan said. He said there is an outsized chance of reaching the national average of $3.29 if there are no major storms on the Gulf Coast or if the refinery closes.
He warned that the decline could be temporarily slow and even greater in some regions, such as California and the Midwest. There was a rise in the prices on Friday in the spot market of those areas.
One reason could be that BP’s Whiting, Indiana refinery in Indiana was closed for a week, he said. BP said 435,000 barrels per day refinery Was returning to normal on Friday. The refinery processes 435,000 barrels a day.
“I still think we may see some states below $3, primarily Oklahoma, Texas by the end of the year, if not earlier,” he said.
The least expensive states for gasoline are in the South. According to AAA, drivers were paying an average of $3.26 per gallon of unleaded in Texas and Arkansas and $3.28 in Mississippi on Monday, according to AAA. Some states are seeing much higher prices, such as California, where the average is $5.26 per gallon, and Nevada, at $4.84.
“Consumers have been incredibly lucky. Not all the bad fears have materialized yet,” said John Kilduff, partner at Again Capital.
“It’s putting a lot of money back in people’s pockets,” he said. “It gives some relief to the people and some relief to the economy. It’s like a big tax cut for the consumers.”
Tom Kloza, head of global energy analysis at Oil Price Information Services, expects prices to go down, but not by that much, and they could be higher again at the end of the year.
“Prices on the balance are going to be relatively pleasant for the rest of the year,” he said. Kloza said the decline nationally is nearing an end, and prices could average as low as between $3.50 and $3.75 per gallon.
“There are a lot of things out there that can cause a high wobble,” he said. He added that Friday is the 80th day of price drop, but the trend may stop. He pointed to higher prices in the wholesale market on Friday.
Another factor Cloza points to is the fact that the US has become a major oil and refined products exporter, which helps support prices.
The US exported nearly 10 million barrels of oil and refined products last week, according to the US Energy Information Administration. Gasoline exports for the week totaled 1 million barrels per day, compared to 466,000 barrels per day in the same period last year. Exports of distillate, which include diesel fuel, reached 1.5 million barrels a day.
The price of oil also remains a wild card for the gasoline market, and geopolitical events could cause another spike at any time. When Russia invaded Ukraine in March, oil prices reached $130 a barrel, but West Texas Intermediate Crude Futures It was trading above $90 a barrel on Monday.
The market has been weaker than some analysts expected. “We haven’t really lost any Russian oil. It’s being redirected to India and China,” Kilduff said. “In the Iraqi turmoil this week, no oil production was affected.”
OPEC+ surprised the oil market on Monday Announcing the partnership will cut production by about 100,000 barrels per day from October. Last month, the group that includes OPEC and other non-OPEC producers, including Russia, increased output by a similar amount.
The move adds further uncertainty to a market that could become more volatile as European countries cut their use of Russian crude until December.
But on the other hand, oil prices have weakened due to China’s economy and that country’s concerns. latest covid lockdown may affect demand.
Analysts say the higher prices at the pump have been just a treat, resulting in less driving by consumers. According to EIA data, demand for gasoline in the US has dropped significantly this summer.
US gasoline demand stood at 8.6 million barrels per day for the week ended August 26. The four-week average was 8.9 million barrels per day, significantly lower than 9.5 million barrels in the same period last year.
In a July survey, AAA found that approximately Two-thirds of respondents said they have changed driving habits Because of high gas prices, and 88% of them said they were driving less.
“OPIS data is showing demand during July and August is 6%, 7% lower than last year,” Kloza said.
He said a hurricane could be a factor for the industry, but so far no major storms have affected Gulf operations.
There have not yet been any major shutdowns in the Gulf Coast during hurricane season, and any storms approaching the East Coast are likely to result in lower energy demands rather than disruptions.