Labor Day marked the end of the summer driving season with the fourth highest Labor Day price on record. However, the average gas price for motorists over the course of the summer ($3.58) was the third highest on record behind 2008 ($3.95) and 2011 ($3.65). While the national average last year was higher to both begin and end the summer driving season, pump prices fell to a less expensive summer low of $3.33 on July 2 versus a low of $3.47 on July 7 this year. The national average price for regular unleaded gasoline was $3.58 per gallon Friday, up a penny from a week ago, yet three cents less than a month ago and 30 cents less than a year ago.
While oil prices remain at lofty levels due to geopolitical tensions in the Middle East and North Africa, retail gas prices have not moved markedly higher during this period. Upward pressure from higher oil prices have been largely offset by comfortable domestic gasoline supplies, demand that has lagged a year ago, and an Atlantic hurricane season that has, thus far, been very weak (for the first time in more than ten years there has been no Atlantic hurricane through the end of August and it is possible that this year may mark the latest date in the satellite era for a first hurricane to form). With this in mind, the potential remains for higher retail prices in the coming weeks and months should storms impact gasoline production and distribution.
Oil prices remain elevated as tensions in the Middle East and North Africa have escalated and the U.S. publically considers military action in Syria. Though Syria’s impact on the global crude market is more political than physical, there is potential for prices to move higher should violence spread to other countries in the region. Crude oil settled at $110.53 at Friday’s close, up nearly three percent on the week and marking the 46th consecutive settlement above $100 per barrel.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks dropped 1.8 million barrels to 360.2 million barrels, lighter than expected. Gasoline inventories also dropped 1.8 million barrels to 216.0 million barrels, a draw much higher than expected by analysts. Gasoline demand was solid once again at just under 9.1 million barrels per day (bpd), with a boost coming in conjunction with the Labor Day holiday. The four-week demand average is more than 9.1 million bpd.
“Gasoline prices usually drop with the end of the summer driving season, but it is impossible to say whether this will be a typical year given the potential risks facing the market,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Escalating tensions in the Middle East and North Africa, possible U.S. action in Syria or a major hurricane could make it more expensive to buy gas, while a relatively calm month should send prices much lower. It is too soon to know how these factors might affect motorists in the coming weeks.”
Gas price trends for September remain uncertain due to several potential risk factors – geopolitical tensions in the Middle East and North Africa, potential U.S. action in Syria and hurricane season forecasted to be more active than usual. That said, gas prices have declined four out of the previous five years in September for an average of eight cents per gallon due to lower demand and the switchover to less expensive winter-blend gasoline. Gas prices in September 2012 decreased about five cents per gallon. The switchover to less-expensive winter-bend gasoline will begin on September 15. Regional prices occasionally rise in the few days leading up to the switchover as supplies of summer-blend gasoline decline before the deadline. Gas stations are required to sell more expensive summer-blend gasoline to meet air-quality regulations.
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