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Record demand, pipeline issues pull gas prices higher

Prices usually drop after Labor Day because of lower demand pressures.

By Daniel J. Graeber
Record demand, pipeline issues pull gas prices higher
The expected seasonal decline in retail gasoline prices delayed by infrastructure problems in the southern United States. File photo by Ismael Mohamad/UPI | License Photo

WASHINGTON, Sept. 27 (UPI) -- Following a robust month for demand, an expected drop in U.S. retail gasoline prices was delayed by pipelines issues in the south, a market report said.

Motor club AAA reports a national average retail price for a gallon of regular unleaded gasoline at $2.21 for Tuesday, unchanged from one week ago. Prices after the Labor Day holiday in the United States usually drop because of a decline in demand, though markets were crimped by a short-term drop in production from the U.S. Gulf of Mexico following recent storms.

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"Although today's average remains flat compared to one week ago, pump prices have been pressured higher in some regions due to disruptions on the Colonial pipeline," AAA said in its weekly retail market report.

Parts of the Colonial pipeline were closed in early September after a leak was discovered. That caused gasoline shortages in the region and major spikes in retail prices in the U.S. south. Pump prices in Great Lakes states, meanwhile, were pulled higher as supplies of gasoline were diverted toward markets impacted by the closure of the Colonial pipeline.

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On the demand side, the American Petroleum Institute reported August total petroleum deliveries, a measure of demand, were at their highest level in nine years. Gasoline deliveries in August were their highest on record.

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A federal report, meanwhile, said gasoline production and inventory levels are offsetting higher consumer demand and keeping prices at the pump in check. Looking forward, consumption is nevertheless on pace to increase by almost 1 percent next year.

"While there's no question that lower gasoline prices induce consumption, we also saw demand diminish as a result of Hurricane Hermine, and the recent spike in southeastern states tied to the Colonial Pipeline leak," Gregg Laskoski, a senior petroleum analyst at GasBuddy.com, said in an emailed statement.

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Two storm systems may be threatening the Gulf of Mexico later this week.

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