WASHINGTON – The U.S. average retail price for regular gasoline was $3.45/gal this past Monday, the lowest price on the Monday before Labor Day since 2010, according to yesterday’s report from the U.S. Energy Information Administration (EIA). The average price at the pump is now 25 cents/gal lower than it was at the end of June.
Declining gas prices have been attributed to a lower North Sea Brent crude oil price; The current price of Brent is lower than it was both in June 2014 and heading into the Labor Day weekend last year.
The recent decline in gasoline prices largely reflects movements in crude oil prices. The recent reduction in the Brent spot price likely reflects the market's perception of reduced risk for Iraqi oil exports and news reports of increasing Libyan oil exports. Additionally, some economic indicators released over the summer suggest that global demand growth may be weaker than expected. Finally, the end of the third quarter and early fourth quarter mark the autumn turnaround season for refineries, and reduced crude buying ahead of cuts in refinery runs is likely putting some downward pressure on prices.
Regional retail gasoline prices in the United States vary significantly. Prices are lowest on the Gulf Coast at an average of $3.24/gal, while prices are highest on the West Coast at an average of $3.83/gal. It is common for the Gulf Coast and West Coast to have the lowest and highest regional prices, respectively. Gulf Coast prices are often low compared with prices in other locations because the Gulf Coast is home to half of the U.S. refining capacity, produces more gasoline than it consumes, and does not rely on supply transferred from other U.S. regions or imported from the global market. West Coast prices are often higher than those in other areas of the country because of the more restrictive gasoline specifications in California, the region's dominant market. California specification gasoline is difficult and more costly to produce. As of August 25, Rocky Mountain prices averaged $3.65/gal and East Coast and Midwest prices both averaged $3.40/gal.
In its August Short-Term Energy Outlook, EIA forecasts that the U.S. average retail price of gasoline will decline modestly through the end of the year, reaching a monthly average low of $3.30/gal in December.