Pump prices continue to fall ahead of the holiday weekend, and the AAA travel-services organization says that barring any unexpected supply blips, motorists in many parts of the country should pay the lowest Labor Day gas prices since 2004. The AAA Daily Fuel Gauge Report said Thursday that the national average for regular unleaded gas fell 9 cents a gallon the past week to $2.44.
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The national average for regular has fallen 18 days in a row and is 99 cents lower than a year ago, largely because oil is much cheaper now. The price of U.S. oil jumped by about $8 a barrel the past week to $48, but that is still only half what it was at this time last year. Diesel fuel has declined even more, falling $1.23 from a year ago to a national average of $2.57 a gallon.
For those who burn premium gas, by choice or because their vehicle requires it, the savings aren't as great. AAA said the $2.94 national average for premium is 86 cents less than a year ago. What's more, the price spread between premium and regular keeps growing and is at an all-time high. The Energy Information Administration says the price spread was less than 20 cents per gallon from 1995 to 2005 but has widened since and doubled over the past two years. AAA says the national average for premium is now 50 cents higher per gallon than regular.
Regular unleaded accounts for 83 percent of the gasoline sold in the U.S., according to the EIA, so refineries are geared to produce regular as the volume product. In comparison, mid-grade gas is only about 7 percent of the national mix, and premium is 10 percent. On a regional basis, though, price differences vary widely based on demand and the types of vehicles people drive, Patrick DeHaan, senior petroleum analyst for GasBuddy.com, said in an interview.
In the Midwest, where pickup trucks and passenger vehicles that burn regular abound, DeHaan said premium has become almost a boutique blend that is produced in small amounts and commands high prices. On the West Coast, though, where the climate and car culture favor performance cars, refineries produce more premium gas, and the greater supply keeps prices lower. The result is that in the Chicago area, the $3.68 average price for premium is 76 cents higher than regular, but in Los Angeles premium goes for $3.75, only 22 cents more than regular. (Prices are from the AAA Daily Fuel Gauge Report and could change.)
"The difference is very regional, and there's a lot more demand for premium in California," DeHaan said.
In addition, more motorists have caught on to the fact that burning premium gas in a vehicle designed to run on regular provides no performance or economy benefits. "It's like flushing money down the toilet. People know they don't have to buy premium unless their car requires it," DeHaan said.
AAA spokesman Michael Green said price often is less of a factor for motorists who buy premium.
"Retailers have found that they can charge higher margins for premium gasoline without losing significant sales. Premium gasoline is generally required in more high-end vehicles, and owners of those more expensive cars may care less about price when purchasing gasoline," Green said in an email.
As the price difference between regular and premium gas keeps getting wider, the spread between regular gas and diesel fuel has narrowed to just 13 cents. The national average for diesel was actually lower than regular for about a week during August. The spread between diesel and regular is likely to widen in the fall because the heavier crude oil used to make diesel is also used to make heating oil. As demand for heating oil increases during the cold months, less crude is available to make diesel, and the price typically rises.
Gas prices typically fall after Labor Day because of reduced demand, and with oil prices expected to remain low, analysts are predicting that motorists in many parts of the country will pay less than $2 a gallon for regular by Christmas. That is already the case in South Carolina, where AAA said the statewide average for regular was $2 and many stations were selling for less. Regular averaged $2.06 in Alabama and Mississippi.
Alaska had the most expensive gas at $3.40 for regular, followed by California at $3.31, Nevada at $3.11 and Hawaii at $3.08. Those were the only states averaging more than $3, and prices fell by at least a couple of cents the past week.
Pump prices continued to fall rapidly in the Great Lakes area, where a BP refinery near Chicago that suffered an outage on Aug. 8 was back online. During the past two weeks the average price of regular has fallen 45 cents In Illinois, 50 cents in Indiana, 52 cents in Michigan and 53 cents in Ohio.
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