If you are gassing up for the long weekend, brace yourself. GasBuddy's Patrick De Haan says the national average could land around $4.03 on Labor Day, eclipsing the prior holiday mark of $3.83 per gallon from 2012. As he put it, "Gasoline, while not at all-time records, is at its highest level ever recorded this late in the calendar year, meaning Americans could for the first time ever see a national average price of gasoline above $4 per gallon on Labor Day."
On Thursday, GasBuddy pegged the national average around $4.13 per gallon, nearly a buck above last year's level. Analysts note that $4 is a psychological line for a lot of households, and pump prices - one of the most visible data points in everyday life - can quickly sway how people feel about the broader economy.
This week, oil pushed above $90 per barrel again after fresh hostilities involving the U.S. and Iran stoked worries about worldwide supply. Distillates like diesel and heating oil also jumped, with ongoing attacks on Russian refineries adding to concerns about tighter product availability. Fuel prices typically track crude because oil is the largest input cost to make gasoline and diesel.
Kuan Dosmuratov at Wood Mackenzie says the story is mostly supply. Anxiety over shipments through the Strait of Hormuz has lifted crude and refining margins, while strikes on Russian refineries have thinned stockpiles. There is not much slack to add supply either. U.S. refineries/) are running near full tilt at about 98% utilization, a level not seen since 2018.
Policymakers have pulled a few levers - Washington extended the Jones Act waiver to smooth movements between U.S. ports and ended summer-blend gasoline rules early - but inventories are still slipping. According to the Energy Information Administration, gasoline inventories fell last week by 1.2 million barrels, ending at 205.7 million barrels, compared with a five-year August norm of 217.6 million barrels.
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"It's completely out of control," said Randi O'Brien, 57, while filling up at a Phillips 66 near Evergreen, Colorado. She said she can only swing $15 at the pump right now and commutes roughly 40 minutes round trip to her job at Home Depot. She blames part of the spike on higher crude and on increased U.S. fuel exports after the start of the Iran war, as more countries leaned on American supplies. The Energy Information Administration says refined product exports are more than 10% higher than last year.
Colorado, Utah, Idaho, Montana, Wyoming, and North Dakota have logged some of the sharpest run ups since the war began. The priciest pump tabs in the country right now are in California, Hawaii, and Washington. In Houston, Madison Moore, 28, said she is trimming her Labor Day plans as daily errands get pricier. "You would think that our government can do a little bit more for their people when they actually need it."
For much of the year, prices have stayed north of $4 a gallon, and that strain is now bleeding into other areas. U.S. diesel set a new record this week. "The public doesn't obsess with diesel but I see a better than even chance that retail numbers will surpass the all-time record of about $5.82 per gallon from June 2022," said Tom Kloza, who serves as chief energy adviser at Gulf Oil. "It presents a worrisome future." AAA forecasts that Labor Day fliers will shell out roughly 20% more for tickets than they did a year ago.
Bottom line for your wallet: holiday trips by car or plane are getting pricier, and the swing factors to watch next are crude around $90, product inventories, and whether refinery runs and policy tweaks can ease the strain.
