Gas Prices Hit an All-Time Labor Day Record at $4.14 a Gallon

• The national average gas price hit $4.14 a gallon over Labor Day weekend, the highest the country has ever paid at the pump for that holiday.
• The previous Labor Day record was $3.82, set in 2012, and this year’s average has climbed roughly 30 cents above where prices sat one month earlier.
• Analysts point to continued volatility in the Strait of Hormuz, which has pushed crude oil above $90 a barrel even as gasoline demand falls in typical late-summer fashion.

Prices Usually Drop After Labor Day. This Year They Are Climbing Instead

American drivers paid more at the pump this Labor Day weekend than for any Labor Day on record, according to AAA. The national average hit $4.14 a gallon on September 3, breaking a record that had stood for fourteen years, and prices kept climbing after that, reaching $4.15 by September 7.

The Numbers Behind the Record

AAA’s data shows the national average has never crossed $4 a gallon on Labor Day before this year. The prior record, $3.82 a gallon, was set on September 3, 2012, when a different set of global supply pressures pushed prices up. This year’s average sits roughly 30 cents higher than the same week one month ago, when the national average was $4.09, and more than a dollar above where prices stood a year ago, when drivers paid $3.19 on average.

Normally, gas prices fall through late summer and into September as gasoline demand drops after the peak summer driving season ends. That pattern held true on the demand side this year. Data from the Energy Information Administration shows gasoline demand fell from 9.04 million barrels a day to 8.92 million barrels a day in the most recent reporting week, exactly the kind of seasonal decline that typically brings prices down. Prices climbed anyway. The cost of crude oil, which makes up the largest share of what drivers pay at the pump, kept rising and overpowered the seasonal dip in demand.

What Is Pushing Crude Oil Prices Higher

AAA points to continued volatility in the Strait of Hormuz, the narrow shipping channel between Iran and Oman that roughly one-fifth of the world’s oil supply passes through, as the main force behind the price jump. That volatility has helped push West Texas Intermediate crude oil into the $90-per-barrel range. On the Wednesday before Labor Day, WTI crude settled at $91.01 a barrel, up 79 cents on the day.

U.S. crude oil inventories tell a similar story. The EIA reported that crude stockpiles fell by 4.5 million barrels in the most recent week, leaving total inventories at 424.5 million barrels, about 1 percent above the five-year average for this time of year but still trending downward. Falling inventories combined with geopolitical tension around a critical shipping route have kept upward pressure on prices even as Americans drive less.

Where Drivers Are Paying the Most and Least

Prices vary sharply by state. California remains the most expensive market in the country at $5.78 a gallon, followed by Washington at $5.47, Hawaii at $5.41, Oregon at $4.98 and Alaska at $4.96. Nevada, Idaho, Arizona, Utah and Montana round out the 10 most expensive states, all above $4.38 a gallon.

Drivers in the Gulf Coast and South are paying far less. Indiana has the cheapest gas in the country at $3.44 a gallon, followed by Texas at $3.69, Oklahoma and Mississippi both at $3.71, and Louisiana at $3.75. Arkansas, South Carolina, Kansas, Alabama and Wisconsin fill out the 10 least expensive states, all under $3.81 a gallon. The roughly $2.34 gap between the most and least expensive states reflects differences in state gas taxes, local environmental fuel blend requirements and distance from major refineries.

EV Charging Costs Are Holding Steady

While gasoline prices climbed, the cost of public EV charging stayed flat. The national average for public charging held at 42 cents per kilowatt hour for the second straight week. West Virginia has the most expensive public charging in the country at 52 cents per kilowatt hour, followed by Hawaii at 51 cents and Alaska at 49 cents. Kansas offers the cheapest public charging at 31 cents, with Missouri and Iowa both at 33 cents. The gap between gas and electric costs gives EV owners some insulation from the kind of crude-driven spike gasoline buyers are experiencing this month.

What This Means Heading Into Fall

Gas prices typically drift lower through September and October as refineries switch to cheaper winter-blend fuel and demand continues its seasonal decline. Whether that pattern reasserts itself this year depends largely on how the situation around the Strait of Hormuz develops. AAA has not forecast a specific price target for the rest of the fall, but the agency’s data shows the gap between typical seasonal price drops and this year’s actual prices has been driven almost entirely by crude oil costs rather than anything happening at U.S. refineries or gas stations themselves.

Drivers looking to offset the higher cost can use AAA’s TripTik Travel planner to compare prices along a planned route, and the app also displays public EV charging rates for anyone comparing a trip in either type of vehicle. Prices can vary by more than 20 cents a gallon between stations in the same city, so planning fill-ups around the cheapest stations along a route remains one of the few tools drivers have to manage costs while the broader crude oil market stays volatile.

Sources:

• AAA Gas Prices
• U.S. Energy Information Administration