The last time gas prices leading up to the Labor Day weekend were this cheap, the world was just moving on from the Olympics in Athens, Greece. Thanks to abundant shale’s depressive effect on global oil prices, gas prices this holiday weekend are hitting a twelve year low. The EIA reports:
The U.S. average retail price for regular gasoline was $2.24/gallon (gal) on August 29, the lowest price on the Monday before Labor Day since 2004, and 27¢/gal lower than the same time last year. Lower crude oil prices are the main factor behind falling U.S. gasoline prices. Lower crude oil prices reflect continued high global crude oil and petroleum product inventories and increased drilling activity in the United States. […]
As fall approaches and U.S. driving decreases, lower gasoline demand, shifts to less costly winter fuel specifications, and reduced crude oil purchases by refineries undergoing seasonal maintenance have the potential to put downward pressure on crude oil and gasoline prices. In the August Short-Term Energy Outlook, EIA forecasts U.S. regular gasoline prices will decline to an average of $1.95/gal during the fourth quarter of 2016 and will average $2.06/gal for 2016.
A global glut precipitated the precipitous collapse in crude prices over the past 26 months, and the bulk of that oversupply has come as a result of resurgent American production, courtesy of fracking. With oil trading today around $45 per barrel—a far cry from those heady $100+ days two summers back—it’s not a stretch to say we’re in a buyer’s market. That’s especially helpful for drivers, one of the biggest consumers of (refined) oil, and it’s being reflected in significant savings at the pump.
For producers, it’s an entirely different story. America’s oil production has flagged over the past year as shale companies have struggled to adjust to shrinking profit margins, though the industry continues to surprise observers with its ability to innovate ways to stay in the black—and keep producing the black gold. The world’s petrostates, however, have had a harder time adjusting, which is why we’re seeing so much talk about a potential deal for a group of these countries to agree to freeze their output at a meeting in Algeria later this month.
In the meantime, drivers hitting American roads for their three day weekend trips this Labor Day will be saving 27 cents per gallon compared to what they spent last year. Thank you, shale.