Good news for families trying to get in one last road trip before school starts: gas prices are falling ahead of Labor Day weekend thanks to booming U.S. oil production from shale formations.
The current average price for a gallon of gasoline is $3.44, according to AAA. A good sign for the 34.7 million Americans who will be traveling this Labor Day weekend — 29.7 million of which will be travelling by car, notes AAA.
“As the economy makes modest gains, more Americans are joining the labor force this year,” said AAA COO Marshall Doney in a statement. “With Labor Day symbolizing the American workers’ contributions to the strength and prosperity of our country, it’s only fitting that millions are choosing to celebrate this positive direction with an all-American road trip.”
This is more than 10 cents below the average gas price for the same time last year. Unfortunately, not every driver will have the benefit of gas under $4 a gallon. Consumers in the South and parts of the Midwest are likely getting their gas for under $3.82, while West Coast and New York drivers are likely to see gas prices above $4 a gallon.
The average price of gasoline is now 25 cents less than it was at the end of June, according to the Energy Information Administration, and gas prices are projected to continue falling this year to an average monthly price of $3.30 per gallon in December.
“Gasoline prices often fall after Labor Day as seasonal demand wanes and as the market shifts to winter fuel specifications, which make greater use of low-cost fuel components,” according to EIA. “However, unplanned refinery outages or unanticipated Brent crude oil price increases add uncertainty to EIA’s forecast and could result in higher-than-expected gasoline prices.”
Why are gas prices so low? Hydraulic fracturing, or fracking, is responsible for allowing oil companies to unlock vast reserves of oil and natural gas that were previously unaccessible. This huge technological achievement has led to a U.S. oil boom and helped lower gas prices.
“It’s crude oil at work,” Trilby Lundberg, president of the Lundberg Survey, told Bloomberg. “The down factors outweighed the up factors. One of the many factors include robust U.S. oil production.”
EIA data shows that.U.S. oil production reached 8.5 million barrels per day in July 2014, the highest monthly levels since April 1987. The agency predicts U.S. production to average 8.5 million barrels per day in 2014 and a whopping 9.3 million barrels per day in 2015 — the highest oil production levels since 1972.
But it’s not all U.S. oil production that’s bringing down gas prices. EIA notes that “recent decreases in the Brent spot price likely reflect the market’s perception of reduced risk for Iraqi oil exports as well as reports of increasing Libyan oil exports.”
There are also indications that global oil demand growth may be weaker than predicted, notes EIA. Autumn also means that it’s “maintenance season for refineries, and reduced crude buying ahead of maintenance is likely putting some downward pressure on prices.”
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