Gas prices are falling fastest in these states

By CNN Newsource

Published August 30, 2024 3:00 AM

By Matt Egan, CNN

New York (CNN) — Labor Day weekend travelers can look forward to lower prices at the gas pump.

GasBuddy is projecting the national average price of gas on Labor Day will be $3.27 a gallon – the cheapest for the holiday since 2021.

That amounts to a decline of 50 cents, or 13%, from Labor Day last year, and 52 cents from Labor Day 2022. And it’s not far from the 2021 Labor Day average of $3.16 a gallon.

During the holiday weekend, Americans are projected to spend about $750 million less on gas than they did last year, according to GasBuddy.

“This is a really good situation,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service.

In fact, drivers in some US states are enjoying an even bigger drop in prices at the pump.

Gas prices are down the most over the past year in Oregon (97 cents), Washington state (93 cents), Arizona (88 cents), Alaska (87 cents) and Utah (68 cents), according to AAA.

The current price is a far cry from the $5-a-gallon gas that Americans faced in June 2022 following Russia’s invasion of Ukraine. Still, Labor Day gas prices were cheaper prior to 2022.

For instance, in 2020, US gas prices averaged $2.22 a gallon on Labor Day, according to GasBuddy. Of course, that ultra-low price reflected very low demand during the Covid-19 crisis, a calamity that briefly sent oil prices below zero.

But even in 2019, the average Labor Day gas price was $2.56 a gallon.

Still, it’s clear the gas price situation has changed meaningfully over the past two years.

The recent drop in gas prices has been driven by a series of factors, including weaker oil prices, softer demand for gasoline and far fewer major refinery outages than last summer when extreme heat sidelined refineries. Stronger refinery activity means more supply of gasoline. Gasoline in US inventories is 3% higher than this point last year, according to federal data.

Another factor: Neither US oil production nor refineries have been disrupted by a major hurricane this year. Of course, that could change as hurricane season is still underway.

Lastly, US oil production has shattered all-time highs, offsetting the loss of oil from OPEC and its allies.

“Oil has been on life support,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

US oil prices are trading at $76 a barrel, down from around $81 a barrel at this point last year.

Kloza noted oil prices didn’t even spike following news of a supply outage in Libya, an OPEC nation.

Saudi Arabia-led OPEC remains a major wildcard in the oil market – especially if the group doesn’t stand by its agreement to add significant supply to the market starting October 1.

“My instinct is OPEC won’t release that supply onto the market,” said Kloza.

But if OPEC does add supply as scheduled, Kloza said there is a 50/50 chance the national average gas price will drop below $3 a gallon. That comes just as gas stations will switch over to the cheaper winter blend of gas, further denting prices.

“Whoever wins the presidency will be guaranteed to start the term with wonderful deflation in energy prices,” Kloza said. “And whoever gets elected will take credit for it.”