AAA: Has summer gas demand peaked?

Seventy percent of gas stations surveyed by the Oil Price Information Service (OPIS) show a lower demand this week, which may signal the peak of summer gasoline demand. In contrast, the four-week rolling average shows 60 percent of stations with higher gasoline sales.

Will demand go up? August is known for its longer road trips. In August 2012, the estimated nationwide vehicle miles of travel (VMT) was 262.4 billion vehicle miles, the Federal Highway Administration (FHWA) calculates. That compares to 258.3 billion vehicle miles that Americans drove in July 2012, and to the estimated 237.1 billion vehicle miles that American motorists racked up on all streets and roads from coast to coast in September 2012, according to the FHWA’s travel trends data.

The national average price for regular unleaded gasoline dropped to $3.63 per gallon Friday, a two cent drop in the past week.  This current price is 15 cents more expensive than one month ago and 10 cents more expensive than the same day last year. The national average remains 16 cents lower than the peak price this year of $3.79 on February 27 and 48 cents below the all-time daily high of $4.11 per gallon on July 17, 2008. Gas prices appear to have hit a summer-low of $3.47 on July 7.

U.S. crude oil prices are at $107.38 as of early Friday morning. Crude oil settled at $106.94 at Friday’s close. While the national average declined recently, AAA expects that prices will rise through the end of the busy summer driving season. This increase is expected because of summertime demand for gasoline, expensive crude oil prices, and the possibility of refinery glitches or supply disruptions from Gulf Coast hurricanes.

In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks saw a 0.4 million barrel increase that put total inventory at 364.6 million barrels. Inventories are now 9 million barrels below last year. Gasoline stocks increased 0.8 million barrels to 223.5 million barrels.  Gasoline demand is up from last week to 9.147 million barrels per day (bpd).  The four-week average demand level is a brisk 9.039 million bpd, compared with 8.756 million bpd last year. The EIA data shows a faster demand rate from May to mid-July, which may have been impacted by stronger gasoline exports.

“August is set to be a volatile month for gas prices despite recent price drops,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Summertime demand for gasoline, expensive crude oil prices, and the possibility of refinery glitches or supply disruptions from Gulf Coast hurricanes could push prices higher.”

Gas prices may increase in August due to the potential for late-summer hurricanes and refinery problems. These types of issues can disrupt production, distribution and gasoline supply at a time when many motorists are filling up their tanks for end-of-summer travel. Gas prices could remain flat or drop if refineries run smoothly and without any major hurricane threat to the Gulf Coast. Gas prices in August 2012 increased 33 cents per gallon due to significant refinery outages and the impact of Hurricane Isaac along the Gulf Coast.