With the arrival of the peak driving season for Americans to travel, will gasoline prices rise?
According to the American Automobile Association, about 60.6 million Americans are expected to drive 50 miles (80 kilometers) or more between June 29 and July 7, up 4.8 percent from a year earlier. Meanwhile, 5.74 million people are expected to travel by air, up 6.9% year-on-year. Another 4.62 million people are expected to travel by other means. It also means a record 71 million Americans will travel during the Independence Day holiday in early July.
This is good news for the oil market, as gasoline demand still looks sluggish.
The sluggish demand has also kept gasoline prices at a two-year low, and as of the 20th, U.S. gasoline has remained at $3.4 per gallon. According to the American Automobile Association, retail gasoline prices are now below the seasonal levels of the past two years, which is also further encouraging road trips.
The key factor in keeping gasoline prices low is that while the number of miles Americans drive will increase over the next period of time, the increase in the efficiency of car fuel consumption will also help consumers reduce their gasoline consumption. Spending at U.S. gas stations during the Memorial Day holiday in May was largely flat compared to a year earlier, according to RBC Capital Markets.
In stark contrast to the low gasoline prices, international crude oil prices have rebounded since June, and as of the 20th, WTI crude oil and Brent crude oil have risen by 9% and 5% respectively, showing the market's 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 in the coming weeks will be key to observing trends in the oil market.
Patrick De Haan, head of oil analysis at GasBuddy, said gasoline demand looks tepid so far this summer, with peak consumption likely to be around 10% lower than last year. But gasoline prices are likely to rebound as soon as the travel rush arrives in July.
"It's true that our gasoline demand is a little bit lower than last year, but we usually see a peak in gasoline demand sometime in late July, so there's still a glimmer of opportunity," Haan said. ”
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