The American Automobile Association predicts that during the Independence Day holiday in early July, a record 71 million Americans will travel by car or plane. Can this wave of travel boom raise gasoline prices in the US, which has been weak for a long time?
As the peak season for American people to travel by car is coming, will gasoline prices rise?
According to the American Automobile Association, between June 29 and July 7, about 60.6 million Americans are expected to drive 50 miles (about 80 km) or more, an increase of 4.8% over the same period last year. Meanwhile, 5.74 million people are expected to travel by air, an increase of 6.9% over the previous year. Another 4.62 million people are expected to travel by other means. This also means that a record 71 million Americans will travel during the Independence Day holiday in early July.
This is good news for the oil market. After all, gasoline demand still seems to be very sluggish.
Meanwhile, sluggish demand also kept gasoline prices at a 2-year low. As of the 20th, US gasoline remained at the level of 3.4 US dollars/gallon. According to the American Automobile Association, the retail price of gasoline is currently below the seasonal level of the past two years, which has further encouraged road trips.
The key factor for low gasoline prices is that although the mileage of Americans will increase over the next period of time, the increase in fuel efficiency of automobiles will also help consumers reduce gasoline consumption. Data from RBC Capital Markets shows that during the Memorial Day holiday in May, US gas station consumption was basically the same as the same period last year.
In stark contrast to the slump in gasoline prices is international crude oil prices. Crude oil prices have rebounded since June. As of the 20th, WTI crude oil and Brent crude oil had risen by 9% and 5% respectively, showing market optimism.
Overall, the travel boom is still driving gasoline demand, but the impact may not be as significant as expected. Travel and gasoline consumption data for the next few weeks will be the key to observing oil market trends.
Patrick De Haan, head of petroleum analysis at GasBuddy, said that so far this summer, demand for gasoline seems tepid, and the peak consumption may be about 10% lower than last year. However, as soon as the peak of travel in July arrives, gasoline prices may rebound.
Haan said, “Currently, our demand for gasoline is indeed a bit lower than last year, but we usually see a peak in gasoline demand sometime in late July, so there is still a glimmer of opportunity.”