Gas prices over the Labor Day weekend are near an all-time high

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NEW YORK – Drivers hitting the roads this Labor Day weekend will be greeted by historically high fuel prices for this time of year.

A record high for gas prices was set during the week before Labor Day in 2012 at $3.84 a gallon, according to CNN’s review of federal data going back to 1990.

Current prices are just shy of that. The national average for regular gas is $3.83 a gallon as of Thursday, according to AAA.

The average price for a gallon of gas in Utah on Thursday is $4.32, according to AAA.

Normally, prices drop at the pump as summer ends. Not this summer.

For a variety of reasons – including OPEC curbing supply and sweltering heat blighting refineries – gas prices have risen steadily this summer. The national price for regular gas averaged $3.58 a gallon on Memorial Day, the unofficial start of summer.

“This is not normal,” said John LaForge, head of real asset strategy at Wells Fargo Investment Institute. “Prices usually fall towards the end of summer.”

Eleven states across the country average $4 per gallon or more, according to AAA. This includes Illinois, Washington, Arizona and California.

The good news is that gas prices are still well below their peak in June 2022. At that time, concerns about supply disruptions in Russia sent oil prices soaring, raising the national average price of regular gas to a record high of 5.02. dollars per gallon.

Gas prices have fallen sharply from those levels as the Russian unrest has not surfaced and the Biden administration has severely depleted emergency oil reserves.

Through the Fourth of July, drivers were saving significantly on fuel economy on a year-over-year basis.

How did the intense heat raise gas prices?

However, the situation changed with the jump in oil prices, supported by easing recession fears and Russia and Saudi Arabia cutting production.

“Saudi Arabia has cut production to boost crude oil prices and balance their budgets,” said Andy Lipow, president of consulting firm Lipow Oil Associates.

Gas prices were also boosted by the record high temperatures that blanketed most of the country this summer.

Some of America’s older refineries — the last major refinery was built in 1977 — can’t operate at full capacity in triple-digit temperatures.

Analysts blame heatwaves and heat-related power outages for causing power outages at multiple refineries. This has limited the amount of gasoline, diesel and jet fuel that refineries can produce at a time of seasonally strong demand.

The latest data from the U.S. Energy Information Administration shows Gulf Coast refineries operated at just 92% of capacity last week.

“They want to run 100 percent,” LeBeau said. “They have the economic incentive to run 100 percent. But they can’t because of the heat.”

Psychologically important prices

It’s worth noting that although gas prices are high at this point in the calendar, these numbers are not adjusted for inflation.

On a real, inflation-adjusted basis, monthly gas prices were well above $4 a gallon in late summer 2011-2014, according to the Energy Information Administration.

However, consumers are very sensitive to gas price increases, in part because of how visible they are. Many people view the price of gas as a key economic barometer.

In fact, the Conference Board blamed the recent rise in gas prices for a decline in consumer confidence in August.

“The average consumer doesn’t think of it in terms of adjusted inflation,” LeBeau said. “Because the price appears around every corner, people see the price and think about what it was like before.”

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