Americans soaking up the end of summer this holiday weekend will catch a break at the gas pump.
Labor Day gas costs are predicted to average $3.15 per gallon this year, making it the most affordable since 2020 during the Covid-19 outbreak, as reported by GasBuddy. This is a slight decrease from the $3.29 per gallon seen last Labor Day.
In certain regions, drivers will encounter prices below $3 per gallon. As of Thursday, the average price has dipped below $3 in 15 states, including Georgia, Texas, North Carolina, and Iowa, based on information from AAA, the automotive and trip-planning organization.
The comparatively lower fuel prices provide a positive note for consumers who are still managing higher living costs at the grocery store and in utility bills, among other expenses. While gas prices have seen a slight increase recently, they are still significantly lower than those of last summer, primarily because oil prices remain low.
“Americans are spending a decreasing percentage of their paychecks on filling up their cars,” stated Patrick De Haan, vice president of petroleum analysis at GasBuddy, during a phone interview with CNN.
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Gas prices took a nosedive in 2020 when the health crisis led many Americans to refrain from traveling by road. That Labor Day, the national average dropped to just $2.22 per gallon.
The following year, gas prices hit a Labor Day all-time high of $3.79 in 2022, which saw gas prices soar to $5 per gallon for the first time due to the surge in oil prices following Russia’s invasion of Ukraine.
“Lowering the cost of energy is very important. It translates to an immediate increase in household cashflow and helps middle and lower-income Americans who are often living paycheck to paycheck,” Joe LaVorgna, counselor to the US treasury secretary, told CNN in a phone interview.
US oil fell below $64 a barrel on Thursday, down from $77.38 a barrel on President Joe Biden’s final full day in office.
The White House took a victory lap for the lower fuel costs, crediting Trump with “fully unleashing American energy dominance” in a statement on Thursday. LaVorgna said oil prices are “largely a result of the president’s policies” and his efforts to get US “allies and partners overseas” to pump more oil.
Although it’s true that US oil production remains near all-time highs, output is little changed since Trump took office, promising to slash red tape and end President Joe Biden’s alleged war on energy.
In fact, US oil output stood at 13.4 million barrels per day during the week ending on August 22, down slightly from 13.5 million during President Joe Biden’s last full week in office, according to federal data.
Still, LaVorgna argued the oil industry is feeling better about investing in future production because of Trump’s deregulatory stance.
“Oil companies are more confident in the outlook – and that they won’t be regulated out of existence,” he said.
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Analysts, on the other hand, have linked low gas prices to the willingness of Saudi Arabia-led OPEC to ramp up production.
After years of holding back supply, OPEC has sharply increased production this year – something Trump publicly called for during a major speech at Davos in January, just days after taking office. OPEC has been accelerating its output to regain market share.
“In terms of keeping prices contained, OPEC’s aggressive return of barrels has arguably been the most unexpected factor,” said Rebecca Babin, senior energy trader at wealth management company CIBC Private Wealth.
Babin said she’s “confident” US oil prices will remain below $70 over the next few months, though she said the “wildcard” would be a sanctions crackdown on Russia or Iran that could lift crude prices.
GasBuddy’s De Haan is also hopeful that tame gas prices are here to stay. The national average of $3.21 per gallon is up 7 cents from a week ago, according to AAA – but De Haan blamed that on severe weather in the Midwest that knocked offline a critical Indiana refinery.
“The timing is up in the air and depends on hurricane season, but the stars look aligned for sub-$3 gas this fall,” De Haan said. “It’s a question of when, not if.”
