With the summer driving season drawing to a close with the Labor Day weekend, motorist group AAA forecasts a sizable drop in prices for gasoline at the pump.
The national gasoline price is likely to average $2.70 a gallon this fall, down from current prices of $2.84 a gallon, and more than a quarter cheaper than this year’s recorded high of $2.97 set in May, AAA said Wednesday.
“Consumers will see savings when they fill up at the pump this fall,” given “cheaper-to-produce gasoline, relatively stable crude oil prices in August,” and an anticipated drop in consumer gasoline demand after Labor Day, said Jeanette Casselano, an AAA spokesperson.
Also contributing to the expected fall in prices at the pump is the switchover to winter-blend gasoline in mid-September from the more environmentally-stringent summer blends, the motorist group said, adding that winter-blend fuel is cheaper to produce.
The arrival of fall also tends to lead to a drop in consumer gasoline demand, as summer road trips and vacations subside, it said.
However, gasoline prices this year have been “significantly more expensive” than in 2017, AAA said. The $2.71 year-to-date average stands 41 cents above the year-ago average. Prices on the futures market, meanwhile, have also climbed, with prices up more than 30% over the last 12 months, based on the October front-month contract RBV8, -0.19% .
And volatility in the crude market CLV8, +0.04% can still prevent cheaper gas prices, said AAA. That would depend on key influences affecting the market, including production from Venezuela, which is seeing its economy collapse, the pledge of higher crude production from the Organization of the Petroleum Exporting Countries and geopolitical uncertainty in the Middle East.
The oil market also continues to monitor the potential impact of U.S. sanctions on Iran, after Washington said in May that it would withdraw from the Iran nuclear deal.
“The first round of re-imposed sanctions on the country, which target Iran’s financial sector, went into effect in August and led to a brief uptick in crude prices,” AAA said. “The next round of sanctions, currently scheduled to take effect in November, will target Iran’s energy sector, including its crude exports, and will likely have a more sustained impact on crude prices.”
Meanwhile, the “mere threat” of an Atlantic hurricane in the U.S. would cause gasoline pump prices to spike on constrained supply and delivery challenges, AAA warned.
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