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As the end of the summer nears and Americans hit the road for one last trip to the beach or the mountains, gas prices are running noticeably lower than they were this time last year. The national average price of regular unleaded stands at $3.15 per gallon. One year ago, it was $3.44. Prices could still spike in coming weeks if a hurricane strikes refineries along the Gulf of Mexico and shuts down significant amounts of production. But for now, there is no sign of such a threat, so most folks should continue to see bearable gas prices. Diesel is also down slightly from a year ago, averaging $3.71 per gallon.
The relatively benign prices at the gas station reflect the fact that crude oil is trading lower this year than last year, with benchmark West Texas Intermediate recently near $63 per barrel. The global oil market appears well-supplied, concerns about supply disruptions in the Middle East due to Israel’s brief war with Iran are over, and global economic growth seems to be softening. All of those factors have helped to curb oil prices a bit. We think WTI will remain in the mid-$60s into the fall, unless signs emerge of a sudden downturn in the U.S. economy, or a new geopolitical crisis threatens significant oil exports in the Middle East or another oil-producing region.
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Natural gas prices are also subdued, with the benchmark gas futures contract recently trading slightly below $3 per million British thermal units. The end of the summer is in sight, and no major heat waves are threatening the most densely populated areas of the country, meaning demand for gas-fired electricity should not get out of hand. Moderately hot weather in the Northeast and Mid-Atlantic this week is forecast to moderate soon, for instance. So gas-fired power plants won’t be working too hard. Early fall isn’t far away, and that is a time of year when relatively mild weather keeps nationwide gas demand muted, allowing surplus gas production to go into underground storage. Gas prices may perk up later in the fall if unseasonably cold weather arrives, but for now, we see gas futures staying near $3 per MMBtu.
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