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Will Lower Summer Gas Prices Boost Car Travel For Vacations?

 
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Fuel gauge

Fuel gauge

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The numbers came in this morning, and gas prices took a sharp drop, with the national average now at just $3.50 per gallon.

And they're expected to stay relatively flat through the summer, barring any surprises and geopolitical actions.

That $3.50 average is s a drop of 7 cents in the last week alone, and sharply lower than in 2008, when the average soared above $4 a gallon.

Prices fell 13 to 18 cents a gallon in West Coast states--California, Oregon, and Washington--with some of the priciest gasoline in the country. Those states are likely to see even lower prices in the weeks ahead.

The $3.50 average, in fact, is little changed from prices last fall, despite the anticipated onset of summer vacation driving.

Gas prices have been falling since early spring, contrary to the more usual pattern in which they rise until about the July 4th weekend in anticipation of higher summer travel.

The national average in February was $3.60, and prices were expected to rise above $4 per gallon from then through next month.

Prices hit that level in a few states with historically pricey gasoline, but the national average never got that high.

 

Gas prices, San Francisco, CA

Gas prices, San Francisco, CA

Enlarge Photo

Analysts say the unexpected drop is due to a combination of factors: global oil price weakness, U.S. refineries increasing production, and weak demand for gasoline due to uncertain global economic prospects and far more efficient new vehicles.

With the average car on U.S. roads now roughly 11 years old, consumers who take the plunge and buy a new vehicle of the same class may be pleasantly surprised how much more efficient it is.

As U.S. drivers replace their cars over the next few years, they will spend less on gasoline doing the same miles in their new vehicles.

So if gas prices have hovered around $3.50 a gallon for more than a year (through some peaks and troughs), it may be that drivers won't consider a rise to almost $4/gallon that big a deal.

Will that $4 level come? Maybe. Probably. Sometime.

Right now, given continuing weak demand for gasoline and falling gas prices just two weeks before the Independence Day weekend, there may be a slight uptick in holiday travel.

But analysts don't expect demand for gasoline to come roaring back.

In fact, U.S. demand for gasoline peaked in 2006 and has fallen since then--and it's expected to continue doing so.

As for prices, we'll watch the news and deal with it when it happens--just like everyone else.

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Comment (1)
  1. Well that's discouraging. Low fuel prices just promote the welfare state of providing cheap fuel to those driving gas guzzlers.
     
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    +1
    Bad stuff?

 

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