U.S. Gas Prices Rising Going Into Labor Day
Sources of information: The U.S. Energy Information Administration and the U.S. Bureau of Labor Statistics provide the data used in this blog section. The weekly data represents the average retail price of regular gasoline in the United States, including all formulations. The real price is determined by using the Consumer Price Index obtained from the Bureau of Labor Statistics.
On the Monday prior to the extended Labor Day weekend, specifically August 28, 2023, the normal cost of regular gasoline reached an average of $3.81 per gallon all over the United States. In the last five weeks, various factors such as reduced oil production by Saudi Arabia, limited stocks of gasoline in the U.S., and scheduled maintenance of refineries in the Northeast have caused a 6% rise in the retail price of regular gasoline, equivalent to a 22 cents per gallon increase.
Based on the information provided in our report titled "Gasoline and Diesel Fuel Update," when considering inflation and actual value, the cost of gasoline at retail outlets leading up to the Labor Day weekend is 4% or 14 cents per gallon cheaper compared to the previous year.
The recent reductions in oil production by Saudi Arabia and other members of OPEC+ have caused the cost of crude oil (which makes up a significant portion of gasoline prices) to rise. In April, when OPEC+ members announced production cuts, it didn't have much impact on crude oil prices since there were worries about a slowdown in economic growth, leading to predictions of stable or decreasing crude oil demand. However, the situation has changed now, as subsequent rounds of cut announcements starting in June and recent evidence of better economic conditions in the United States are causing the price of crude oil to go up.
As we approach Labor Day, the presence of Hurricane Idalia is causing disruptions in production and pipeline facilities along the U.S. Gulf Coast. The closure of these facilities due to the hurricane can lead to uncertainties regarding the retail price of gasoline. The extent to which this will impact prices depends on how long and severe the closures are.
Higher gasoline prices have also been influenced by restricted gasoline supplies. Refinery shutdowns caused by severe weather conditions and refineries undergoing maintenance that was originally planned for the previous year have resulted in U.S. gasoline stock falling below the average from the past five years since March 2022. Currently, we anticipate that the scheduled maintenance for Irving Oil's refinery in Saint John, New Brunswick (320,000 barrels per day [b/d]), and Monroe Energy's refinery in Trainer, Pennsylvania (185,000 b/d), which will take place from mid-September to mid-November, will further limit gasoline supplies, especially in the Northeast. Although the East Coast is the largest consumer of gasoline in the United States, it has relatively limited refinery capacity.
Source of data: U.S. Energy Information Administration's update on gasoline and diesel fuel.
Gas prices in the United States differ depending on the region, which is influenced by various factors such as local supply and demand, fuel requirements based on state laws, and taxes. Typically, the highest gasoline prices can be found on the West Coast. This can be attributed to the limited connections it has with other major refining centers like the Gulf Coast, as well as the tight supply and demand conditions in the area. Additionally, there are specific gasoline specifications enforced in this region that make the manufacturing process more costly. As of August 28, gas prices on the West Coast were at $4.88 per gallon, which is a 2% increase or a 10 cent rise compared to the same period last year. Similarly, the Rocky Mountains region faces similar logistical challenges as the West Coast, although the overall supply and demand in the area are lower. Retail gas prices in the Rocky Mountains averaged at $3.98 per gallon, representing a 1% decrease or a 4 cent drop from the previous year.
The Gulf Coast holds the major share of the nation's refining capacity, constituting around 54% as of January 2023. Furthermore, it produces a surplus of gasoline compared to its consumption. Due to this surplus, gasoline prices on the Gulf Coast are frequently the most affordable in the entire United States. On August 28th, the typical retail price of gasoline in the Gulf Coast stood at $3.38 per gallon, marking a modest 1% increase or a rise of 2 cents in comparison to the corresponding period of the previous year.
In the eastern part of the United States, the cost of regular gasoline at retail stores was $3.64 per gallon on August 28th. This price was 1% lower than the price recorded at the same period the previous year, resulting in a decrease of 4 cents. Similarly, in the midwestern states, the cost of gasoline dropped by 1% or 4 cents, leading to a price of $3.68 per gallon.
Main author: Alex de Keyserling
Post on U.S. EIA's Today In Energy blog.
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