Seven is considered the lucky number, and if so, that’s the way consumers are feeling as they hit the highways for the Memorial Day holiday weekend. Just in time for the first big holiday weekend of the summer, the cost of gasoline has dropped for seven weeks in a row. That’s the longest stretch since June 2011, when prices dipped for six straight weeks. This bodes well for the 30.7 million Americans who plan to drive to their holiday destinations. Memorial Day represents the traditional start of the summer driving season and signals increased demand as more Americans take vacations, and as proof, nine out of ten holiday travelers (88 percent) will take to the nation’s roadways this weekend.
Contrary to popular belief and conventional wisdom, gasoline prices are not on the rise this Memorial Day. In fact, gasoline prices have been falling every week since Easter and are now down 26 cents a gallon since their high of $3.94 in early April. In fact, gasoline prices are sixteen cents cheaper than they were at this time last year, when they averaged $3.84 per gallon across the nation.
In another lucky break for consumers, WTI crude oil futures dropped below $90 a barrel on Wednesday, falling $2.25, or 2.5 percent, to $89.90. That’s the first time oil has dropped under $90 a barrel in nearly seven months, or since October 2011. By the same token, Brent crude futures also dipped considerably heading into the holiday, nose-diving $2.85 a barrel to $105.56. That’s the lowest ebb for Brent since December, stirring optimism for drivers who took a beating at the pumps from January to April. Consumers are cheering because gasoline prices tend to trace crude oil prices.
Domestic commercial crude oil stocks continued to build for the ninth consecutive week, adding nearly a million barrel in the last week alone. So far this year, crude inventories, excluding Strategic Petroleum Reserves, have leap-frogged more than 52 million barrels, notes the Energy Information Administration. To find better crude builds, you will have to go back more than two decades to the start of the first Persian Gulf War/Operation Desert Storm. “This week marks the first back-to-back weeks that inventories have stood above 380 million since the end of July and early August 1990,” according to the Oil Price Information Service, which supplies daily fuel price data to AAA.
“Memorial Day is a harbinger of summer travel trends. The steady drop in pump prices in the weeks ahead of the holiday has also put Americans in the mood for traveling,” said John B. Townsend II, Manager of Public and Government Affairs for AAA Mid-Atlantic. “In fact, 875,000 Washington area residents will travel 50 miles or more from home this weekend. Of that number, 783,000 local residents will do so by automobile. It’s worth noting that this is only the second Memorial Day in recent memory in which we are reporting a sharp drop in gasoline prices ahead of the holiday weekend, and last year was the first. Virtually, every other year, Memorial Day featured the peak gas prices, or they were still on their way up.”
The Week Ahead
Crude oil prices rebounded yesterday from a seven-month low. Professional traders and markets watchers are keeping a wary eye on Strait of Hormuz and the sovereign debt crisis in Europe. In their second round of meetings, international negotiators are attempting to defuse the ticking time bomb regarding Iran’s nuclear intentions. Over in the Eurozone, there are new concerns whether Greece will walk away from the Euro. As a result, the Euro tumbled to its lowest level against the almighty dollar since July 2010. Have gasoline prices peaked for the year? Inquiring minds want to know. Barring the unexpected, the unforeseen and the unpredictable, it is hard to say. Even if gasoline prices continue to decline throughout the summer months, some energy analysts are still predicting that 2012 will go down in history as “the most expensive year ever for gasoline.”