Drivers can expect to pay more at the gas pump when they hit the road for Labor Day weekend. Devastating floods unleashed by Hurricane Harvey have taken more than 10% of the nation’s oil-refining capacity offline, which means less fuel available during one of the busiest travel weekends of the year. The storm itself has weakened, but the flooding along the Texas and Louisiana coasts is still worsening, which means it’s too early to say when the region’s refineries can return to normal operations.
The national average price of regular unleaded is up 4 cents from a week ago, to $2.38 per gallon. Look for that figure to near $2.50 by Labor Day. If refinery outages persist, gasoline prices will remain elevated well into September before gradually declining. Diesel, now averaging $2.54 per gallon, will probably hit at least $2.60 soon.
Crude oil prices are actually falling because closed or hobbled refineries have limited demand. Benchmark West Texas Intermediate was recently trading at $46 per barrel, down a couple of dollars from last week. The price should rebound a bit once refineries return to full operation and begin buying more oil, but don’t expect a major price rally. Looking farther ahead, we expect WTI to trade from $40 to $45 per barrel in December.