US retail prices for regular gasoline averaged $3.45/gal on Aug. 25, which was lowest price on a Monday preceding the Labor Day holiday in the US since 2010, according to data from the US Energy Information Administration. The average price at the pump is now 25¢/gal lower than it was at the end of June.
The decline in gasoline prices largely reflects lower North Sea Brent crude oil prices. “The current Brent price is lower than it was last month, and lower than it was on Labor Day weekend last year,” EIA said.
The Brent spot prices fell to $102/bbl on Aug. 22 after reaching its year-to-date high of $115/bbl in June. Current Brent prices are below their August average level over the past 3 years, which ranged $110-113/bbl.
The market’s perception of reduced risk for Iraq oil exports as well as report of increasing Libyan oil exports are the main drivers in the recent decreases in the Brent spot price, EIA said. Weaker-than-expected global demand growth suggested by some summer economic indicators and recued crude buying ahead of the autumn maintenance season for refineries are also likely putting downward pressure on prices.
Regional retail gasoline prices in the US vary significantly. Prices are lowest on the Gulf Coast ($3.24/gal) and highest on the West Coast ($3.83/gal) as of Aug. 25. Gulf Coast prices are often low compared with prices in other regions because of that region’s proximity to half the nation’s refining capacity—its gasoline production is greater than the region’s consumption—and because it does not rely on supply transferred from other US regions or imported from the global market. West Coast prices are often higher than those in other areas of the country because of the more restrictive gasoline specifications in California, the region’s dominant market. As of Aug. 25, prices in the Rocky Mountains region and East Coast averaged $3.65/gal and $3.40/gal, respectively.
In its August Short-Term Energy Outlook, EIA forecast that the US average retail price of gasoline will decline modestly through yearend, reaching a monthly average low of $3.30/gal in December. Gasoline prices often fall after Labor Day as seasonal demand wanes and as the market shifts to winter fuel specifications, which make greater use of low-cost fuel components. However, unplanned refinery outages or unanticipated Brent crude oil price increases add uncertainty to EIA’s forecast and could result in higher-than-expected gasoline prices.