NEW YORK (BLOOMBERG) -- A record number of people are expected to travel by car over Memorial Day weekend, a sign of resilient demand for fuel amid surging pump prices, at least for now.
Some 39.1 million people are projected to drive at least 50 miles for the holiday weekend and unofficial start of summer, the American Automobile Association said on Monday, while 39 million people took road trips during the same period last year.
A gallon of gas is now holding above $4.50, up from around $3.17 during the same weekend last year, according to AAA data.
“People aren’t going to want to restrict their travel on holidays,” said Patrick De Haan, head of petroleum analysis at GasBuddy. “Even if gas is $6 a gallon, it’s the holidays where people are still going to travel.”
The Memorial Day forecast is the least bullish for the period in the last decade, save for 2020, when AAA did not release an auto travel forecast amid the COVID-19 pandemic.
Average gasoline prices are at their highest seasonal level on record, and sit around 50 cents off all-time highs set in June 2022, according to AAA data. As the war in Iran approaches the three-month mark, the Strait of Hormuz remains effectively shut, sending crude oil and refined product prices surging globally.
Prices may fall slightly in the event of a federal gasoline tax holiday, an idea President Donald Trump voiced support for on Monday.
At least so far, the worst of the issue has emerged abroad and in other fuels, such as jet fuel and diesel. Average US diesel prices are hovering less than 20 cents off all-time records, while surging jet fuel costs have prompted airlines to cancel flights and triggered the shutdown of Spirit Airlines.
As of last week, seasonal demand for gasoline in the US remained roughly in line with averages from the last decade, according to Department of Energy data.
That doesn’t mean high prices won’t begin precluding consumers from buying gas down the line, with $5 a gallon gas a legitimate possibility, JPMorgan Chase & Co. analysts wrote last week.
For lower-income drivers, higher prices have already prompted some demand destruction. In March, households earning less than $40,000 a year saw a 12% increase in their nominal gasoline spending — and a 7% decrease in their actual consumption of gasoline, according to an analysis from the Federal Reserve Bank of New York.
Meanwhile, national gasoline stockpiles are near their lowest seasonal levels since 2014 — and in the Midwest, where prices have risen the fastest, stockpiles are at their second-lowest seasonal levels on record.
At the current clip, the country’s inventories are on pace to be at their lowest seasonal levels on record at the end of August, according to Morgan Stanley.
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