Pump prices rise ahead of Labor Day travelers, airlines expecting overflow traffic

by Wesley Brown ([email protected]) 231 views 

As the summer driver season winds down to a close, pump prices are rising daily as gasoline retailers look to cash in on the millions of travelers that will be taking to the roads on the long Labor Day weekend to get a respite from the energy-consuming back-to-school rush.

After dropping for two months, including a streak of 53 of 54 days, retail gasoline prices are again on the rise heading into the official Labor Day holiday, which begins on Wednesday and runs through Monday, Sept. 5.

At $2.22 per gallon, the national average price for regular unleaded gasoline has increased for 15 consecutive days. Tuesday’s (Aug. 30) average price marks an increase of six cents per gallon compared to one week ago and eight cents per gallon compared to one month ago. Despite the increase, drivers are paying 27 cents less than they did at this same time last year and are on track to pay the lowest Labor Day gas prices since 2004.

Michael Right, AAA spokesman for the region that covers Arkansas, Missouri, Mississippi, Louisiana, southern Illinois and eastern Kansas, said a number of factors have been driving prices higher for motorists. That factors include higher crude oil prices, refinery issues in the flood-prone Gulf Coast region, and the threat of a tropical weather system moving into the Gulf of Mexico. However, Right said the biggest factor in has been the recent upward swing in crude oil prices, which have risen from around $30 a barrel six weeks ago to current prices around $50 a barrel in international and U.S. markets.

The AAA spokesman said the recent surge in crude oil prices is directly attributable to news that Saudi Arabia and fellow OPEC members may agree to a production freeze with non-OPEC members like Russia at a meeting in Algeria in late September. On Monday, international Brent crude fell 0.66 cents, or 1.3%, to $49.26 a barrel, while U.S. crude was down 66 cents, or 1.4%, at $46.98 on the New York Mercantile Exchange.

“Oil markets are very skittish,” Right said. “Any kind of news that might suggest that oversupply is going to dry up or production is going to cease is going to cause an immediate reaction.”

Despite the rising pump prices, 55% of Americans say they are more likely to take a road trip this year due to lower gas prices, according to a AAA survey. Meanwhile, the Oil Price Information Service (OPIS) projects that Americans will purchase about 400-million gallons of gasoline each day over Labor Day weekend, at an aggregate cost of about $880-million per day. While the national year-over-year discount remains, it has closed substantially from more than 50 cents just 10 days ago.

In Arkansas, gas prices over the past week have seen their biggest movement since the Fourth of July holiday, when a record number of traveler hit the road to celebrate Independence Day. Despite the traditionally pre-Labor Day pump price run-up, most gas stations in Arkansas are still posting prices for just above the $2 a gallon level.

According to AAA’s daily fuel gauge, motorists in or driving through Arkansas are paying an average of $2.06 per gallon to fill up their tank. That is about six cents higher than a week ago and 13 cents above levels at the end of July. Pump prices in the state’s metropolitan areas range from a low of $2 in the Fort Smith area to a high of $2.08 for residents and motorist filling up on either the Texas or Arkansas side of the Texarkana stateline.

Motorists in the Fayetteville-Springdale Rogers and the Little Rock-North Little Rock, the state’s two largest metropolitan areas, are seeing prices at an average of $2.05 per gallon, and travelers in the Pine Bluff area a pay a penny less to fill up their tanks.

Drivers choosing to fill up the tanks with a higher-grade of gasoline should expect to pay an average premium of $2.55 a gallon across the state. Big rig drivers and other diesel fuel users will see pump prices at about $2.23 a gallon, down 16 cents from a year ago.

According to GasBuddy.com, several areas cross the state are still seeing prices well below $2 a gallon, including several stations in pockets of Fort Smith and northeast Arkansas are seeing prices as low as $1.90 per gallon for regular unleaded. Nationally, gas prices in three states are below $2.00 per gallon, six fewer than one week ago: South Carolina ($1.95), Alabama ($1.98) and Mississippi ($1.996).

States around the country have seen volatility in gas prices including drivers in the Great Lakes region, the Rockies, central and southern states. The biggest weekly increases in price are seen in Florida (+13 cents), Tennessee (+9 cents), Georgia (+9 cents), Missouri (+8 cents), Kansas (+8 cents), North Carolina (+8 cents), South Carolina (+8 cents), Colorado (+8 cents), Michigan (+7 cents) and Illinois (+7 cents).

Not only will the roads be crowded, but 15.6 million passengers are expected to fly on scheduled service on U.S. airlines over the Labor Day holiday period, a 4% increase from the 2015 Labor Day period, according to travel industry trade group Airlines for America (A4A).

During the seven-day Labor Day travel period, A4A expects 2.23M air travelers a day will take to the skies, up approximately 82,000 per day from the same period in 2015. For travelers looking to take weekend trip, Thursday and Friday are expected to be the busiest days of the period.

“On the heels of this summer’s record volumes and falling ticket prices, A4A anticipates a commensurate increase in the number of flyers for the Labor Day period,” said John Heimlich, A4A Vice President and Chief Economist. “U.S. airlines are well positioned to meet the growing demand for air travel and are responding by increasing the number of seats available by 4 percent.”

Heimlich said air travel remains one of the best consumer bargains as fares were down 5.2% systemwide in 2015 and down 6% the first so far in 2016. Ten U.S. passenger airlines – Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and Virgin America – collectively reported a pre-tax profit of approximately $12 billion, up from $11.3 billion during the same period of 2015. This translated to a profit margin of 15.5%, or 15.5 cents on every dollar of revenue.

The year-over-year improvement was fueled by a 1.9 percent drop in operating expenses, with falling fuel prices making up for the increased labor, aircraft and airport costs.

“For the first time since the Great Recession, airlines are finally achieving profit margins on par with the average U.S. corporation,” said Heimlich. “Customers, employees and investors are benefiting every day from a financially healthy airline industry that is able to invest in the products, technologies and amenities the traveling public values.”