The national average gas price has fallen this week, which marked the second consecutive year that the average American motorist has paid less per gallon at the pump when filling up for their Memorial Day holiday travel.
The national average dropped to $3.63 per gallon this Memorial Day. On the previous two Memorial Days the national average was $3.64 per gallon (May 28, 2012) and $3.79 (May 30, 2011). By Friday the national average price for regular unleaded gasoline dropped further to $3.61 per gallon. This price is nine cents more expensive than one month ago, but it is four cents less expensive than one week ago. The average American motorist has enjoyed a lower year-over-year pump price for 92 consecutive days, but those savings have narrowed substantially to a penny per gallon, down significantly from the peak year-to-date discount of 39 cents on April 18.
Crude oil has remained relatively flat over the past few weeks, fluctuating slightly on both sides of the $95 per barrel mark. The commodity has been primarily driven by a weakened U.S. dollar, which hovered near a three-week low against the euro on Friday. A weak dollar boosts oil prices as it makes commodities priced in dollars cheaper for those buying with other currencies. This week the latest data showed U.S. GDP grew slightly less than expected in the first quarter and new unemployment benefits claims rose last week, emphasizing a fragile U.S. economy and weakened demand. Internationally, concerns that China, the world’s second biggest oil consumer and economy, is losing steam continue to grow. Expectations of weak worldwide demand and higher inventories have kept a lid on oil prices in recent months. Crude oil settled at $91.97 Friday, down 2.5 percent on the week.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks rose 3 million barrels to 397.6, putting the once unheard of 400 million barrel level in play. Gasoline stockpiles fell 1.5 million barrels to 219.2 million barrels. EIA showed gasoline demand rising 166,000 barrels per day (bpd), exceeding expectations, to a respectable 8.956 million bpd. While that number is shy of recent Memorial Day fill-up levels, it at least offers a hint of some driving season lift. However, very substantial challenges for motor fuel remain ahead. As recently as six years ago, gasoline demand averaged 9.541 million bpd in the five weeks that overlapped the June 2007 calendar. This year has yet to see a single 9 million bpd gasoline number. We will certainly witness those in July, but whether one pops up in June is questionable. Last year produced just one “rogue” 9.13 million bpd week and another 9 million bpd assessment. The U.S. hasn’t seen 9 million bpd in a weekly report since Aug. 31, 2012.
“After several weeks of steady increases, gas prices have begun to retreat as summer ‘unofficially’ got underway over the Memorial Day weekend,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Experts believe the recent spike was temporary and that relief is just around the bend. Prices are noticeably lower in most areas this weekend and should continue to drop throughout the summer months to the $3.20 to $3.40 per gallon range, which would be welcome news for motorists planning summer road trips.”
June 1 marks the official start of hurricane season. The National Oceanic and Atmospheric Administration (NOAA) is predicting another active season with 13 to 20 named storms. Seven to 11 of them are projected to reach hurricane status. Though there were a large number of named storms in 2012, Hurricane Sandy had the biggest impact. How a storm could affect oil and pump prices is determined by the severity of damage, if any, to refineries and offshore platforms. Last year, Hurricane Sandy actually caused pump prices to fall in many areas due to decreased demand.
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