If you’re planning on driving this Labor Day weekend, be prepared to pay more at the pump.
And don’t expect gas prices to come down after the holiday.
AAA reports the national average price for gasoline is now about $2.84 per gallon. That’s almost 17% higher than gas prices were last year. And it’s the highest consumers will pay for gasoline during Labor Day weekend in four years.
There are a lot of reasons gasoline prices are higher than in recent years. But the main drivers of rising gas prices right now are U.S. inventories and the looming trade sanctions against countries that import crude oil from Iran.
As I’m sure you well know, back in May, President Trump signed an executive order that would remove the United States from the so-called “Iran deal.” And it stated the U.S. would impose sanctions on other nations buying Iranian oil.
These sanctions have been on the lips of every financial media reporter all summer. A few weeks ago, the president updated that order with a new EO that made changes to the sanctions policy.
The new order directed sanctions to take place in two phases. The first phase began almost immediately after Trump signed the new EO and mostly targets governments, businesses, and private individuals dealing in monetary assets with Iran.
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Those assets include certain currency transactions, gold and precious metals, and dealings in Iranian sovereign debt. The initial sanction phase also took aim at Iran’s auto industry.
The second phase, however, is the big one. This phase singles out Iran’s financial and energy sectors, including the nation’s central bank and oil exports.
It also targets Iran’s port operators, shipping, and shipbuilding sectors in an additional effort to hit the nation’s energy industry.
This phase will begin November 5th, just eight weeks from today.
Some European countries have already begun to decrease Iran oil imports and appear they will comply with pressure from Washington.
Others, however, like China, have already said they will not give in to Trump’s demands.
The geopolitical discourse over these sanctions is bound to make more enemies than friends. And the result will very likely be increasing oil prices.
Meanwhile, U.S. crude inventories continue to fall. Commercial crude stockpiles declined by 2.6 million barrels last week to about 406 million barrels.
All this means you’ll probably be shelling out over $3.00 per gallon for gasoline again before Thanksgiving.
And we haven’t even talked about hurricane season. September is the most active month for hurricanes, which typically drive oil prices higher almost every year.
So if you fill up your car this weekend, take a photo of the price sign. It’s probably the last time you’ll see gas prices under $3 a gallon for a long time.
Until next time,
Luke Burgess
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
