U.S. oil prices hit new records this weekend but, despite rising costs, millions of American motorists took to the streets for the unofficial start of the summer.
Even if the average cost of a gallon of gasoline breaks at $ 4.60 for the first time, about 35 million people are expected to cross the streets over Memorial day weekend, which traditionally marks the start of the driving season. in the summer of America, according to AAA, a motor group.
That would mark a 5 percent increase in numbers last year as holidaymakers indulge in post-pandemic freedom.
“I think it’s all systems going by the end of the week,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. “There’s a public attitude where it’s like: ‘I need it’.”
But despite the haste in the early summer, high prices are starting to hurt motorists. While drivers may be willing to spend the holidays, they reduce day-to-day spending for travel and social travel.
“We are already starting to see a return to the term‘ demand destruction ’,” Kloza said.
Oil prices have risen rapidly over the past two years due to the reopening of the U.S. economy pushing demand to exceed supply. Russia’s invasion of Ukraine in February shook crude markets and accelerated rising fuel costs.
With the national average sitting at $ 4.61 a gallon on Saturday, prices are more than 50 percent higher than a year ago. In California, they cost more than $ 6 a gallon. Diesel is even more expensive.
That’s already starting to force gasoline-guzzling drivers in the U.S. to rethink their car use. The average American family burns 90 gallons of oil a month – more than any other major economy – which translates into an outlay of $ 414 at current prices.
Oil demand for the four weeks to May 20, the latest data provided by the Energy Information Administration, is 8.8mn barrels per day. That’s a 3 percent slide last week and nearly 700,000 barrels below the same period last year.
“It would appear that high prices are causing what I would say is a low level of demand breakdown,” said Patrick DeHaan, head of oil price analysis at app GasBuddy. He suggested demand over the holiday weekend would be 7-13 percent lower than in 2019.
Rising fuel costs have fed widespread inflation across the economy, which has become a serious problem for President Joe Biden, who is blamed on high prices by many voters despite limited ability to influence. them.
In the run-up to the midterm elections, the Biden administration has taken steps to lower prices, including releasing unprecedented amounts of crude from strategic reserves, removing ethanol mixing bans and reliance on U.S. oil companies and foreign producers turn on taps.
Other options have also been floated, including cutting the 18.3-cent federal fuel tax or removing summer pollution rules.
Bloomberg reported last week that the administration has spoken to U.S. refiners about supporting the reopening of some closed refineries. The White House did not respond to a request for comment.
“I expect him to pull one of these levers at some point,” Kloza said. “They want to be considered doing something.”