Record gasoline prices hit the start of Americans’ summer travel season


Millions of Americans hit the road over Memorial Day weekend, with record gas prices knocking their wallets out.

The national average price for a gallon of regular unleaded gasoline hit $4.62 on Monday, according to AAA, $1.58 higher than a year earlier and about 12% above the pre-2022 high. from $4.11 set in 2008. Prices are up about 11% from last month, according to the organization’s figures, and gas was recently above $4 in all 50 states.

The records at the pump come as Americans grapple with four-decade highs in inflation, paying more for everyday purchases, including bread and milk. Analysts said petrol prices have so far failed to change many motorists’ summer travel plans, in part due to pent-up travel demand after Covid 19 restrictions.

“People decided, ‘Look, I’ve been good. I’ve been working for two years. I’m going to go for it, and I’m going to get big,” AAA spokesman Andrew Gross said. The organization said in May that 34.9 million Americans were expected to travel by automobile over Memorial Day weekend, up 4.5% from 2021.

Still, some motorists say they are reconsidering summer road trips. A survey by AAA in March found that two-thirds of Americans felt gasoline was too expensive when it was $3.53 a gallon; if it were to hit $5, which happened on the West Coast, three-quarters of drivers said they would have to adapt.

Amalia Velázquez, a single mother of three boys who lives in San Diego, isn’t sure if she’ll be able to take her children to visit their grandmother to celebrate her birthday in June. Gas prices have squeezed Ms. Velázquez’s budget, and her mother lives about 120 miles away in Mexicali, Mexico.

Ms. Velázquez said she currently spends $80 to fill up her 2019 Toyota RAV4, compared to around $45 before the pandemic. For now, Ms. Velázquez and her sons are spending less at restaurants to save money.

“I don’t think I’ll be doing that drive anytime soon,” she said of the trip to Mexico.

Gasoline prices vary widely from place to place depending on taxes and access to energy infrastructure. California drivers currently pay the most of any state on average, at $6.17 per gallon, up $1.96 from last year, according to AAA. The states with the next highest average prices, Hawaii and Nevada, were also recently above $5 a gallon.

Meanwhile, in Oklahoma, Kansas and Arkansas, the states with the lowest current average prices, gasoline was still around $4 a gallon, although around 50% higher than last year.

As gasoline prices soar, many consumers are wondering if buying an electric vehicle could save them money in the long run. The WSJ’s George Downs breaks down four factors to consider when buying a new car. Photo composition: George Downs

Gasoline prices rise and fall based on a range of factors. Although crude oil prices have retreated from the highs of March 2022, they still remain around $120 a barrel, about 70% higher than a year ago. Oil inventories were already tight due to demand caused by the economic reopening; Russia’s invasion of Ukraine further upset the market.

In the United States, refining capacity has declined during pandemic-related shutdowns and restrictions. The market has lost around one million barrels of daily oil refining capacity since the start of 2020, when the United States produced around 19 million barrels of refined oil per day.

Analysts are closely monitoring the health of the American consumer. Jake Remley, senior portfolio manager at Income Research + Management, said household cash balances remain strong, thanks in part to pandemic monetary stimulus. Recent economic data, however, suggests that wage growth is slowing.

“We have a cushion here, and it’s starting to erode,” Mr Remley said.

Analysts say fuel prices could fall if China’s Covid-19 cases lead to further shutdowns or travel restrictions, reducing demand for oil, or if Russia and Ukraine reach a ceasefire deal -fire. They also monitor whether consumers adjust their driving habits in the face of higher costs.

Gasoline prices have been the subject of political debate, putting pressure on the White House. In response, President Biden released strategic reserves and passed mandates to increase the amount of ethanol blending in fuel in an effort to reduce fuel prices. US officials said last week that Mr Biden had not ruled out an oil export ban.

New York on Wednesday became the latest state to suspend its gasoline tax, suspending its tax on regular gasoline and diesel until the end of the year.

Other refined products have risen even more strongly, with diesel gaining more than 70% so far this year, according to AAA data. Higher diesel prices mean higher input costs for trucks and tractors. Tom Kloza, global head of energy analytics for energy information services firm OPIS, said consumers can expect these costs to hit their wallets.

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“It’s not going to be as much of a trickle; it will look more like Niagara Falls as the increases start to come in,” Kloza said. OPIS is owned by Dow Jones & Co., owner of The Wall Street Journal.

Some consumers switch vehicles to moderate fuel costs. Tom VanStavern, owner of a motorcycle shop in Columbus, Ohio, used to pick up his 8-year-old son from school in a 2015 Ford Transit minivan that burns 15 mpg. Now, he says, he uses a 2001 Kawasaki motorcycle with a sidecar, which gets around 45 mpg.

Average gasoline prices in Ohio are $4.45 a gallon, up $1.50 from a year ago.

“Normally for work I have to drive a van,” Mr VanStavern said. “It went from $60 to fill up to $100, so now I’m dropping the van off at home.”

The difficult summer travel season

Write to Hardika Singh at hardika.singh@wsj.com

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