Today’s fuel price musings - What happens next?

September 3rd, 2008 at 12:36pm Thomas V. Bona

So will gas prices drop now that Labor Day has passed and the summer driving season is over? While that may seem to intuitively be the pattern, in recent years it’s been a crapshoot (things like 9/11, hurricanes and general economic trends have thrown those numbers off).

Going back to 1993, using data from AAA and the U.S. Energy Information Administration shows this. In 9 of those years (1994, 1995, 1997, 1998, 2000, 2001, 2003, 2005 and 2006) prices generally went down post-Labor Day. The biggest drops were in the calamity years of 2001 and 2005.

In 2001, 9/11 send the world economy into a spiral. Gas averaged $1.55 a gallon nationally at the beginning of September, reaching $1.08 by February (a 30.3 percent drop). Prices didn’t reach their pre-9/11 levels until February. Of 2003.

In 2005, Hurricane Katrina boosted gas to $3.04 a gallon around Labor Day, and Hurricane Rita kept prices near there. They didn’t start their descent until October, but they fell hard, hitting $2.12 by early December. That was a 30.2 percent drop. But prices were back around $3 by the following August.

This also shows the rule that “what goes down must come up”. In the years prices dropped after Labor Day, they returned to that level by the following March or April six times. Once, they returned to a high level in the spring but didn’t reach the Labor Day mark until August. And twice, it took two years to get back,

The years gas went up after Labor Day were 1996, 1999, 2002, 2004 and 2007.

In 1996, prices came back down by April. In 1999, prices went up and didn’t come back down until fall 2001. In 2002, they went up a bit then came back down by the end of the year, but then started a long-term upward trend. In 2004, they came back to Labor Day levels by December, even dropping a few cents. But soon, the days of $2.00 gas were here to stay. And you know what happened in 2007.

What does that mean? That’s a long, in-depth way of saying I have NO CLUE what’s happening next. For now, prices keep inching down…

(Our Gas Tracker feature is down right now. We’ll let you know when it’s back up.)

Here’s the price situation as of this morning (prices courtesy of AAAs fuelgaugereport.com):

Gasoline: Rockford dropped almost a cent to $3.74 a gallon. We’re down to seventh in the state in gas prices. The Illinois average dropped more than a cent to $3.86. The national average dropped a fraction of a cent to remain at $3.64. Illinois has the eighth-highest gas prices in the nation.

Diesel: Rockford increased a fraction of a cent to remain at $4.13 a gallon, still down 47 cents in the past month. Despite the increase, we dropped to the eighth-highest diesel prices in the state. The state average remained at $4.32, down 34 cents in the past month. The national average increased almost a cent to $4.27, still down 39 cents in the past month. Illinois has the 17th-highest prices in the country (including the District of Columbia).

Entry Filed under: Fuel price musings