Labor Day gas prices have never been this high

Credit cards were working overtime at gas stations across the US this weekend. Pump prices for this time of year hit their highest level on record over the holiday, driven by continued oil disruptions from the Iran war and the Russia-Ukraine war.

Gas cost an average of $4.15 per gallon yesterday, according to AAA:

• Gas never surpassed $4/gallon on Labor Day before this year.
• The previous record for the holiday was $3.82/gallon, set in 2012 (the record is $5.02/gallon in June 2022).
• The new record is ~30% higher than gas prices were this time last year, on average.

For context, gas prices tend to move seasonally—rising through spring and summer, beginning their descent by Labor Day, and hitting their lowest lows in the winter, when days are shorter and people tend to drive less.

This year is an exception: Iran has constrained tanker traffic through the Strait of Hormuz since the war started in February, while Ukrainian drone attacks have disabled some Russian refineries. US gas inventories were 6% below average for the last full week of August, according to the US Energy Information Administration.

You’re still feeling the effects, even if you don’t have a car

According to AAA:

• Diesel (fuel for freight trucks that carry everything from food to clothing) spiked almost 60% from last Labor Day weekend to hit a record high of $5.85/gallon going into the holiday.
• Prices for domestic flights to 10 of the most popular US destinations were up ~20% this weekend compared with last year.

Looking ahead…the EPA moved up the date when refineries can switch from summer gas blends to cheaper winter blends from Sept. 15 to Sept. 1, which may provide some relief at the pump. But the broader oil outlook is uncertain: Iran plans to expand its Strait lockdown in response to new US strikes, and US refineries are already working at near-total capacity.—ML