Commodities Corner: Fourth-of-July gasoline prices: What to expect amid record travel numbers

Tom Kloza is the global head of Energy Analysis at Oil Price Information Service, a Dow Jones Company. He estimates that the average fuel price this weekend will be around $3.55. He believes that gas prices for the 4th of July holiday will be the fourth highest ever, surpassing last year’s average of $4.81 per gallon and the $3.66 in 2014.

Prices will vary depending on where you live. Kloza says that states who get their gasoline from refiners located in Texas and Louisiana can expect to see “a lot of prices below $3 per gallon” while those in the Rocky Mountains or West Coast may see higher prices.

According to AAA, on Thursday, the average gas price in Texas was $3.185, while California drivers spent an average of $4.827.

Brian Milne is a product manager, analyst and editor at DTN. He said that compared to last year, when gasoline prices nationwide reached a record of over $5 per gallon, the prices during the holiday season are a bargain.

According to MarketWatch, recent history shows that gas prices are “higher” than for eight out of the last 10 Fourth of July holidays.

This is not a comforting experience for the traveler. AAA estimates 50.7 million people are expected to travel by plane, car, train, boat, and cruise ship over the long weekend. This is more than last year’s 48.7 millions travelers, or the record 49 million in 2019.

Read this: According to AAA, Fourth of July travel records will be broken.

Patrick De Haan is the head of Petroleum Analysis at GasBuddy. He said that U.S. motorists are paying on average $20 less this year to fill their 15-gallon tanks than they did last year.

He said that uncertainty about demand is a major factor in the decline of gasoline prices. The demand has not been as strong this year as expected, and monetary tightening is causing oil demand to be worried.

De Haan said that the Independence Day holiday will last from Friday or Thursday through the following Wednesday. This is a longer period than in previous years, but he does not expect a surge in demand due to the lower gas prices.

De Haan said that drivers are saving on gas, but everything else, including hotels, is more costly. So, demand for the holiday is not likely to be a record, he added.

He said that the gasoline demand for the July 4 holiday may reach 9.3 or 9.4 millions barrels per day. This is compared to a record of 10 million barrels per day in 2019.

DTN’s Milne stated that the U.S. gas demand at the halfway point of the year is 1.5% more than it was in 2022. However, gasoline demand still trails the prepandemic rates “considerably”, down 4.7% and 4,6% respectively compared to 2018 and 2019.

The drop in retail gas prices is also largely due to lower crude oil prices. Milne noted that retail gas prices had reached a high of over $5 in 2022, as global oil prices surged following Russia’s invasion.

As the war continues, Milne said that “the worst fears about oil flow disruptions have disappeared.”

Supply will be the major concern in the future.

Milne says that hurricanes are the main risk factor for gasoline price increases this summer. The Atlantic hurricane season began officially on June 1, and will run through November 30. The National Oceanic and Atmospheric Administration has predicted “near normal” Atlantic hurricane activity for this year. This includes 12 to 17 named hurricanes and the possibility of five to nine becoming hurricanes.

Milne said that oil refining capacity in the United States is concentrated on the Gulf Coast. He said that despite efforts in recent years to “harden” these facilities, a direct hurricane hit would disrupt refinery operation, and could shut down a facility for a long period of time. “Such a situation would drive gasoline prices up.”

OPIS’s Kloza emphasized the uncertainty regarding the future supply of gasoline. He said that there will be “a lot crossed fingers” on the July and August gasoline supply.

He said that the Northeast’s travel demand peaks in August while the rest is at its peak in July. Currently, Western gasoline prices remain high enough to discourage driving along the Pacific Coast. However, the Rocky Mountain States are experiencing the biggest surge in demand.

Kloza stated that the fourth quarter will see a significant drop in gasoline prices, but the third quarter could be a coin toss.