The price of petrol at the pump has been going down before the end of the summer drive season. Analysts say drivers shouldn’t rule out the chance of a spike, even though demand usually starts to drop around this time of year.
Before Labour Day, petrol prices were lower than they have been in recent years. AAA spokesman Andrew Gross said that costs tend to drop after the holiday.
He did say, “We must watch the Atlantic because it is still hurricane season.” Hurricanes can have an effect on the Gulf of Mexico, where 15% of the country’s oil production comes from federal offshore oil output. Along the Gulf Coast, you can also find more than 48% of all the oil refineries in the United States.
Oil prices, which have been in the mid- to low-$70s for a while now, will be the most important thing to keep an eye on for petrol.
Wednesday, the price of a barrel of U.S. benchmark West Texas Intermediate oil for October delivery CL.1 -0.08% CLV24 -0.07% was set at $74.52.
AAA, an organisation for motoring and leisure travel, says that the average price for a gallon of normal unleaded petrol was $3.361 on Wednesday. That’s about 12% less than it was a year ago and 4.1% less than it was a month ago.
Tom Kloza, global head of energy analysis at OPIS, a subsidiary of MarketWatch publisher Dow Jones, said that this year would be similar to the last ten years in that petrol futures, wholesale prices, and retail prices would all have a second hump, like a Bactrian camel. However, petrol hasn’t been getting many bids lately.
He also said that petrol prices tend to go down in September, October, November, and the first part of December because of a “incredible undertow.”
As the summer drive season comes to an end with this coming Labour Day weekend, there will be less demand for gasoline because people will not be on vacation anymore.
On the other hand, Kloza said that petrol prices are “flirting” with around $2 a gallon in the U.S. Gulf Coast, which is the world’s largest producing market and produces about 10 million barrels of refined goods every day. He said that the last time that many were seen in that area was in December and January of last year.
The “recipe” for gasoline in the Gulf Coast will change next Thursday so that blenders can add more “cheap molecules like butane into the gasoline mixture,” Kloza said. The change from the cheaper summer blend of petrol to the cheaper winter blend of petrol was what he was talking about.
When you add in the usual drop in demand of about 400,000 barrels per day after Labour Day, “you have a situation that should bring much cheaper fuel,” he said.
But for the week ending August 23, demand for petrol slowly went up. Total motor petrol supplied, which is a good indicator of demand, rose from 9.193 million barrels per day the week before to 9.307 million barrels per day. This is according to figures released Wednesday by the Energy Information Administration.
The prices consumers see on Labor Day weekend are quite likely to be ‘appreciably higher than the number that will characterize the rest of the last 125 days of the year.’
Tom Kloza, OPIS
As Kloza put it, the prices people see over Labour Day weekend are expected to be “appreciably higher than the number that will characterise the rest of the last 125 days of the year.”
Kloza said that attitude can be “spoilt” by two things.
He said that OPEC and its partners, which stand for the Organisation of the Petroleum Exporting Countries, could keep production cuts in place after October 1. They have said in the past that this date would allow several hundred thousand more barrels of oil to flow every day. Keeping the production cuts in place could make it harder to get crude oil, which would cause petrol prices to go up.
A Category 3 hurricane, with winds of 111 to 129 miles per hour, could also stop oil output in the Gulf of Mexico and make petrol more expensive, Kloza said. Hurricane season in the Atlantic doesn’t end until November 30.
Kloza said that OPEC+ might decide to keep cutting oil production, but that they would likely need to do more cuts to “really strengthen crude prices.”
“Most of the research firms that do supply/demand balances for 2025 think that there will be a small surplus overall, with supply being higher than demand,” he said.
Kloza believes there is “modest petrol demand destruction in the country and most petrol marketers are seeing sales below 2023 levels.” He also believes that the drop in petrol prices is not because of “intrusion” of electric vehicles, except maybe in California.
Mostly, he thinks that petrol prices will fall to between $2.75 and $2.99 in December and January. He said that prices might drop even more if OPEC+ lets out more oil.
A big new refinery in Nigeria called Dangote could make 650,000 barrels of petrol per day. If they can figure out how to make petrol that meets U.S. and European standards, Kloza said, prices could “change the game” and go down. It was in January that the biggest oil plant in Africa started making diesel and jet fuel.
All of the research put together points to “slow and steady price depreciation” for petrol, Kloza said.
The winner of the U.S. presidential election in November is likely to try to claim credit for the drop in petrol prices. However, these are “macro trends that demonstrate just how much of a global market crude oil and petrol are these days,” he said.
