After reaching new-record highs earlier this month, gas prices have continued to decline for the second straight week, which is welcome news for the 31 million Americans who plan to travel by car this Memorial Day weekend. Since reaching a spring high of $3.98 per gallon on May 4th, prices at the pump have dropped 17 cents to $3.81 Friday for the start of the long holiday weekend. Despite recent declines, gas prices remain $1.05 above year ago prices and 30 cents shy of the all-time record of $4.11 set in July 2008.
“Declining gas prices, a summer-like weather forecast and a long holiday weekend are set to combine for what is sure to be a memorable Memorial Day weekend,” said Martha M. Meade, manager of public and government affairs for AAA Mid-Atlantic. “After a long winter and rainy spring, these factors are undoubtedly motivating an estimated 34.9 million travelers to take a trip away from home this holiday weekend.”
Crude oil continued to trade in a narrow range for the second week, between $97 and $101 per barrel. Despite settling at $101.32 Wednesday, the highest level since May 10, crude retreated Thursday as data showed the U.S. economy grew less than forecast in the first quarter, a sign fuel demand may struggle to recover. The U.S. Commerce Department said the Gross Domestic Product for the first quarter of 2011 grew 1.8 percent, showing no change from last month’s estimate and contrary to expectations of an upward revision. Also tempering demand concerns was a weak U.S. dollar, the immediate factor impacting crude oil’s upward movement, to settle at $100.23 Thursday. Despite mid-week gains, crude oil was still headed for its first monthly loss since last August.
In its weekly report, the U.S. Energy Information Administration data showed crude stocks rose 616,000 barrels to 370.9 million barrels. Gasoline stocks rose 3.8 million barrels to 209.7 million barrels. The EIA also reported gasoline demand fell by 23,000 barrels per day (bpd) to 9.025 million bpd and the cumulative 2011 gasoline demand total is just 0.5 percent behind 2010.
The long awaited relief from pain at the pump for U.S. motorists might finally be at hand, just in time for the summer driving season. Beginning last September we have seen the biggest price jump since the summer of 2008, driven predominantly by speculators, not supply and demand fundamentals. Now that prices have begun to retreat, analysts believe they will settle in the $3.25 and $3.75 per gallon range during the summer months.
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Chris Graham
