Aug. 29–Drivers traveling on summer’s last big weekend face the highest Labor Day gas prices since 2014, but higher inventories and lower demand for gasoline are expected to reduce costs at the pump as the peak driving season comes to an end.
How far and how long gasoline prices will fall, of course, depend on crude prices, which have rallied this week as supplies appear to tighten.
U.S. gasoline inventories, however, remain about 5 percent above the five-year average, despite declining by 1.6 million barrels last week, the Energy Department reported Wednesday. Demand spiked ahead of the three-day weekend, according to the Energy Department, but average consumption this summer has been softer compared to last season in part because of higher gas prices.
Experts say that plentiful supplies and waning demand will likely provide additional relief to motorists after Labor Day, which ends the busy summer driving season and begins a shift to cheaper, winter-grade gasoline. Rising crude oil prices, however, could slow or offset those declines, particularly if U.S. sanctions on Iran continue to curtail global supplies.
“You can expect gas prices to drop, but the question is by how much,” said Denton Cinquegrana, chief oil analyst for IHS Markits’ Oil Price Information Service.
Gas prices this summer increased alongside crude oil prices to reach their highest levels since 2014. Nationally, gas prices are expected to average $2.84 a gallon over the holiday weekend, about 20 cents higher than last year, according to GasBuddy, which tracks prices nationwide.
Refiners, however, have processed record amounts of crude oil this summer, adding to gasoline stockpiles and helping to keep prices at the pump relatively stable. Refineries ran at just over 96 percent of capacity last week to process 17.6 million barrels of crude oil a day, slightly less than the prior week.
Bob Yawger, director of the futures division at Mizuho Securities, said he expects demand for gasoline to continue to fall in the weeks after Labor Day, reducing gas prices. That, he added, will likely prompt refiners to reduce their production rates.
“I wouldn’t be surprised to see the market pull back a little bit,” he said.
The relief, however, could be short-lived as crude oil prices rebound after slipping this summer. In New York trading Wednesday, oil settled at $69.51 — the highest level in weeks — after the Energy Department reported another drop in domestic crude inventories.
In addition,Venezuela’s crude oil production continues to fall amid a financial and political crisis there, reducing global supplies. Inventories are expected to further tighten and likely push crude prices higher in November, when the U.S. imposes a second round of sanctions on Iranian oil exports. Initial measures took effect earlier this month.
Patrick DeHaan, head of petroleum analysis at GasBuddy, said those factors could keep prices at the pump higher than usual during the fall.
“Average prices could drop into $2.60s or $2.70s,” he said, “but probably not a whole lot more than that as we wade through these turbulent waters.”
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