Labor Day drivers get a break at the pump

HOUSTON (ICIS)–US drivers will likely see the cheapest retail gasoline prices for Labor Day weekend in 11 years as crude oil continues its downward spiral.

The national average for retail gasoline was at $2.42/gal on Friday. That was hovering right under a dollar per gallon cheaper than the same week last year.

“US consumers should save more than $1 billion on gasoline over the holiday weekend compared to 2014, with many drivers saving about $15-$25 on every trip to the gas station,” said Michael Green of the motorist group AAA.

Retail prices on Friday were nearly 40 cents/gal less than 2015’s peak price in June of $2.80/gal. Prices in August, averaging $2.60/gal, were the lowest in 10 years for that month.

US national average for retail gasoline ($/gal)

Despite Midwest refinery problems in recent weeks and new production issues, reported by Reuters, cropping up this week on the east coast, retail prices have continued to fall, which Green attributes to supply outpacing demand.

US gasoline inventories have fallen some over the summer but remain strong at 214.2m bbl last week, according to supply statistics by the Energy Information Administration (EIA).

US drivers have not slowed down their travel habits so far. Driving miles in the US for the first half of 2015 hit 1.54 trillion, according to estimates released in late August by the Federal Highway Administration (FHWA). This beats the previous record from 2007 of 1.5 trillion miles.

Summer months are the heaviest for driving in the US – typically it lessens as winter comes closer.

“When the market is running smoothly, gas prices generally drop about 2.4 cents per gallon for every $1 per barrel change in the cost of crude oil,” Green said.

Crude oil has been especially volatile in recent months, with daily futures settlements swinging from the $61/bbl range in June to $38/bbl near the end of August. Crude oil prices are the leading force of gasoline prices, which have also seen steep climbs and sharp plunges over the summer.

According to AAA, more than 5% of US retail gasoline stations are currently selling fuel for under $2/gal. South Carolina and Gulf Coast states are seeing the lowest US prices, and the Pacific northwest and west coast are seeing the country’s highest retail prices.

“As fall approaches and US driving levels are lower, reduced gasoline demand, shifts to less costly winter specifications for gasoline, and reduced crude oil purchases by refineries undergoing seasonal maintenance have the potential to put downward pressure on crude oil and gasoline prices,” the EIA said on Friday.

US national average for retail gasoline on Labor Day ($/gal)

*2015 price based on the Friday preceeding Labor Day

Another sector of Labor Day travellers will likely not see lower prices over the weekend: airline passengers.

Industry trade group Airlines For America (A4A) is expecting 14.2m US air passengers over Labor Day weekend, including 12.6m domestic fliers and 1.6m international travellers.

Friday is expected to be the busiest flying day of the week surrounding Labor Day. Lower jet fuel prices do not typically translate into lower ticket prices for fliers.