Labor Day weekend travelers can look forward to lower gas prices at the pump this year, with GasBuddy projecting the national average price of gas to be $3.27 a gallon – the cheapest for the holiday since 2021. This is a significant decline of 50 cents, or 13%, from Labor Day last year and 52 cents from Labor Day 2022. Americans are projected to spend about $750 million less on gas during the holiday weekend compared to last year. Some US states are enjoying an even bigger drop in prices, with Oregon, Washington state, Arizona, Alaska, and Utah seeing declines of up to 97 cents per gallon.
The current gas prices are a far cry from the $5-a-gallon prices that Americans faced in June 2022 following Russia’s invasion of Ukraine. However, Labor Day gas prices were cheaper prior to 2022, with gas averaging $2.22 a gallon in 2021 and $2.56 a gallon in 2019. The recent drop in gas prices has been driven by weaker oil prices, softer demand for gasoline, and stronger refinery activity leading to more gasoline supply in the US. Additionally, US oil production has reached all-time highs, offsetting the loss of oil from OPEC and its allies.
US oil prices are currently trading at $76 a barrel, down from around $81 a barrel at this time last year. Despite news of a supply outage in Libya, oil prices have not spiked, with OPEC remaining a major wildcard in the oil market. If OPEC does stand by its agreement to add significant supply to the market starting October 1, there is a 50/50 chance the national average gas price will drop below $3 a gallon. The switch to cheaper winter blend gas at gas stations could further dent prices.
The drop in gas prices is a positive development for consumers and could benefit the incoming US president by starting their term with lower energy prices. However, the situation remains uncertain, with potential disruptions from hurricanes still a concern and OPEC’s decision on adding supply to the market posing a key risk. Overall, the gas price situation has changed meaningfully over the past two years, with factors such as weaker oil prices, stronger refinery activity, and higher US oil production contributing to the current lower prices at the pump.
Despite these positive developments, there is still uncertainty in the oil market, with OPEC’s decision on adding supply remaining a major factor that could impact gas prices in the future. The drop in gas prices this year has been driven by a combination of factors, including weaker oil prices, softer demand for gasoline, and increased refinery activity in the US. While Americans can enjoy lower gas prices for Labor Day weekend, the situation could change in the coming months depending on various geopolitical and economic factors.
