As the summer driving season comes to an end, gasoline prices for the week before Labor Day reached the lowest in 11 years. The pump price for regular unleaded gasoline was $2.51/gal on Aug. 31, according to the US Energy Information Administration. This is the lowest price for the Monday before Labor Day since 2004. Labor Day typically marks the last weekend that American consumers take to the road for any long summer road trips.
Declining crude oil prices have of course been the impetus for these lower gasoline prices. “Lower crude oil prices reflect concerns about economic growth in emerging markets, expectations of higher oil exports from Iran, and continuing actual and expected growth in global crude oil inventories,” EIA said.
Since the last week of January, when the US average retail gasoline price was $2.04/gal, retail prices have risen by $47¢/gal to the current $2.51/gal. Prices were driven up by rising crude oil prices at the beginning of the year as well as strong demand for this past summer’s driving season and unplanned outages at West Coast refineries.
Regional prices
Regular unleaded gasoline averaged $3.16/gal on the West Coast while averaging $2.20/gal along the Gulf Coast. Gasoline continues to be in short supply, mainly in California, therefore having the highest priced gasoline of the states that EIA surveys. EIA reported on Aug. 31 that gasoline prices averaged $3.34/gal in California, $3.55/gal in Los Angeles, and $3.24/gal for San Francisco.
In mid-August, an unplanned outage at BP PLC’s refinery in Whiting, Ind., drove Midwest retail gasoline prices up 60¢/gal. Prices have since stabilized and gasoline prices for Chicago now average $2.95/gal and Cleveland at $2.31/gal.
The Midwest price showed the largest decline in the last week, down 20¢ to $2.47/gal. Most of the nation’s refining capacity is along the Gulf Coast where the lowest gasoline prices are found. Houston prices average $2.21/gal and the Gulf Coast region averaging $2.20/gal. East Coast prices were down 9¢/gal to $2.34/gal. Rocky Mountain prices were down 5¢ to $2.77/gal.
As the US summer driving season comes to an end and fall approaches, gasoline demand will begin to decline, refiners will shut down for seasonal maintenance thus purchasing less crude oil for processing, and refiners will shift gasoline specifications to winter grade. All of these factors should lead to declining prices for both crude oil and gasoline.
In its Short-Term Energy Outlook for September, EIA forecasts that US regular grade gasoline prices will decline to an average of $2.11/gal during this year’s fourth quarter, and reach $2.41/gal for an annual average for 2015. This would end 2015 down by almost $1 from the annual average for 2014 of $3.36/gal. Inventory for total gasoline for the fourth quarter will rise to 230 million bbl from 215.7 million bbl at the end of the third quarter.
“As with crude oil, the market’s belief of uncertainty in monthly average gasoline prices is reflected in the pricing and implied volatility of futures and options contracts,” EIA said. “New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contracts for November delivery traded over the 5-day period ending Aug. 6 averaged $1.45/gal. The probability that the RBOB futures price will exceed $1.85/gal (consistent with a US average regular gasoline retail price of $2.50/gal in November 2015) is about 7%.”
The US average diesel fuel price fell 5¢ from the previous week to $2.51/gal, down $1.30/gal from the same time last year. The East Coast price decreased 6¢ to $2.59/gal. The Midwest, Gulf Coast, and West Coast prices each were down 4¢, to $2.44/gal, $2.38/gal, and $2.72/gal, respectively. The Rocky Mountain price declined 3¢ to $2.56/gal.
