U.S. drivers might be feeling flush after getting tax cuts amid a growing economy as they embark on the summer driving season, but road trips will cost more this year.
Drivers are already paying an average of $2.90 for a gallon of regular gasoline. There may be no relief in sight as oil in London topped $80 a barrel May 17 on tightening global supplies. The traditional Memorial Day holiday kickoff of summer driving season may test the strength of the economy and consumers’ desire to hit the road as temperatures rise.
Prices have risen for nine days straight, according to AAA.
While average costs aren’t expected to approach the record $4.14 a gallon reached in July 2008, there’s a 75% chance they will soon reach $3, Patrick DeHaan, head of petroleum analyst at GasBuddy, said in a phone interview May 17.
For the three months of summer, assuming prices don’t rise any more, Americans will pay an average $100 more for gasoline than a year earlier, DeHaan said.
“I think people may cut back on fast casual dining or McDonald’s on the way to the lake,” DeHaan said. “I don’t know that we will see a net drop in demand. While this may curb or slow down discretionary demand, it will be offset by the strength of the economy. And I think the worst-case scenario is $3.15 to $3.20.”
The higher prices aren’t expected to stop Americans from hitting the road. AAA projects a 4.7% jump in travel by automobile over the U.S. Memorial Day holiday weekend.
Retail gasoline prices “are going up,” Ashley Petersen, lead oil analyst at Stratas Advisors in New York, said in a phone interview. “Hopefully, you took your road trip last year because it is going to be more expensive this year.”