With Labor Day weekend on the horizon, Americans who were on the road this summer experienced a bit of sticker shock as prices surged in late July and into early August. Through Sunday, the national average price of a gallon of gas, according to AAA, stood at $3.82 which is the second highest price for this time of year since at least 2004. The only year that the national average price was higher as of 8/27 was last year ($3.85), and the average price for this time of year has historically been $2.91.Looking at the summer driving season (Memorial Day through Labor Day), the national price has increased by 6.7% this year. While 6.7% may not sound particularly large, we would note that the median change during the summer driving season since 2004 has been a decline of 3.7%, and prices have only increased 35% of the time. In addition, this year’s increase ranks as the fourth largest trailing only 2017 (+11.8%), 2020 (+13.0%), and the 46.1% surge in 2005 due to the landfall of Hurricane Katrina in the Gulf of Mexico.

While prices this summer increased much more than normal, on a YTD basis, the increase has been right in line with the historical norm. As shown in the chart below, while the average YTD change through 8/27 has been a gain of 17.5% since 2005, this year’s increase of 19.0% is less than two percentage points more than normal. For the last four months of the year, can we expect to see the typical seasonal decline? Since 2004, the AAA national price’s median change from Labor Day through year-end has been a decline of 7.5% with increases just 36% of the time. Investors looking for inflation to continue to trend lower so that interest rates might come down will certainly be hoping gas prices follow the historical script over the final four months of 2023.

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