It is an unwelcome milestone for Americans making their way out for the long weekend: the nation’s average gasoline price is set to pass $4 a gallon. Between surging crude costs and tight supplies, analysts caution that the holiday could put new records on the books for both pump prices and public sentiment.
There is more to the $4 mark than psychology. Patrick De Haan of GasBuddy has the nationwide average at roughly $4.03 for Labor Day, which would put it ahead of the $3.83 figure from 2012. In his view, one does not usually see prices this elevated so late in the year.
Drivers of the price spike
The US and Iran have been involved in renewed military action, and in the wake of it oil markets have tightened, with crude back over $90 a barrel. Any talk of the Strait of Hormuz being disrupted is enough to lift refining margins and crude, and that is reflected at the register.
Then there are the attacks on Russian refineries, which have only added to the squeeze by raising questions over diesel and the like. Domestic supply is also being drawn down by US exports of refined products, which are up more than 10 per cent on last year.
A tight market with little breathing room
Refineries in the US are running at about 98% capacity, the most we have seen since 2018, so there is no room to put out more product in a hurry. The Energy Information Administration reports gasoline inventories have dropped 1.2 million barrels to 205.7 million, well under the 217.6 million five-year average for August.
Some figures to bear in mind for the weekend:
– National average hit $4.13 a gallon on Thursday
– Almost a dollar more than this time last year
– A $4.03 forecast for Labor Day
– $3.83 was the going rate for the record in 2012
– 205.7 million barrels in stock
– 217.6 million is the five-year August mean
Where motorists are hurting most
You will find some of the steepest recent hikes in inland states such as Colorado, Utah, Idaho, Montana, Wyoming and North Dakota. It is enough to change habits; a driver here and there is putting off a trip or not filling up quite as much.
As for California, Hawaii and Washington, they continue to be the priciest places for gasoline, furthering the regional divide as the holiday rush gets underway.
Costs spreading beyond the pump
Diesel is at record highs this week, putting the squeeze on freight and retail. Tom Kloza, chief energy adviser at Gulf Oil, sees a better than even chance that the old record of some $5.82 a gallon from June 2022 will be bested.
Those looking to fly are not immune. AAA puts airfares for the holiday at 20 per cent above a year ago, a cost that adds up for millions with last-minute plans.
Economic and political stakes
Fuel is something you see every day, so the $4 barrier can put a damper on the mood when it comes to the economy. High prices at the pump are tantamount to a tax on the consumer, curbing what one can spend on top of the autumn bills and school re-opening.
For President Donald Trump it is a political test. He has made much of his promise to lower energy costs and taken refiners to task over them. With the midterms coming into focus, stubbornly high fuel prices are likely to ruffle feathers among voters.
Thursday’s numbers from GasBuddy put the average at $4.13, nearly a dollar up from last year. Should the country cross $4 on Labor Day, the record may stand and cheaper fuel will have to wait, marking a hard close to the summer for many US households.
