Gasoline Prices Drop on Memorial Day Weekend

Gasoline prices drop on Memorial Day weekend

Prices at the pump are falling just in time for Memorial Day weekend.

Good news for Americans hitting the road during what could be a record-breaking Memorial Day driving weekend: prices at the pump are falling again.

According to federal data, the slow but steady decline pushed the average cost of regular gasoline in the United States to $3.58 a gallon last week, down from $3.67 about a month ago. The latest figure is roughly in line with prices a year ago and about 5% less than the typical cost before Memorial Day since 2000, when adjusted for inflation.

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Regional fuel prices often move independently due to storms, taxes, and refinery maintenance. However, over the past month, gas costs monitored by federal record keepers have declined in every region of the country. According to AAA, motorists in Las Vegas, the Phoenix area, and Sacramento, California, are seeing some of the steepest cuts.

The declines come at an opportune moment. Memorial Day marks the unofficial start of the summer road trip season. AAA expects 38.4 million people to travel 50 miles or more by car this weekend.

Lower fuel costs are helping the Federal Reserve fight inflation while the central bank considers whether and when to cut interest rates from their highest levels in two decades. As President Biden kicks his re-election campaign into high gear, a moderate price drop on highway billboards and gas station screens could also boost Americans' economic expectations. Gasoline futures extended declines this week after the administration said it would tap fuel reserves in the Northeast to release 1 million barrels of gasoline — a small fraction of a single day's U.S. consumption — to help set prices.

This downward shift represents a reversal of what happened earlier this year when gasoline prices rose faster than their usual annual rise and supported inflation.

"It looks like this summer will be mostly good for drivers hitting the road," said Patrick De Haan, head of petroleum analysis at GasBuddy.

The exchange of air strikes between Israel and Iran in mid-April did not expand into a broader conflict, which eased fears of an oil shock that might shake global markets. Meanwhile, the Fed's warning about cutting interest rates too quickly is strengthening the U.S. dollar and slowing trade in some emerging markets that pay for oil in dollars.

Additional supplies keep storage tanks well-stocked around the world. Oil exploration companies in the United States are intensifying their activity after winter storms caused some wells to stop working. A newly expanded pipeline from the Canadian oil sands to an export terminal near Vancouver is moving more crude oil to the global market. Marine production from Guyana continues to grow.

Crude oil prices have fallen, reducing the cost of June gasoline shipments to New York Harbor by about 13% since April 16.

On Wall Street, many traders now expect the Saudi-led Organization of the Petroleum Exporting Countries and its Russia-led allies to extend oil production cuts at their meeting in June. This could keep prices at a floor, although the International Energy Agency and the U.S. Energy Information Administration recently lowered their forecasts for global demand growth this year.

In the United States, drivers collectively put nearly 763 billion miles on their odometers during March, a record high for the first three months of the year, according to the Federal Highway Administration. However, federal estimates for gasoline demand remained roughly flat from a year ago, thanks in part to more hybrid and electric vehicles.

Ari Kotler, CEO of gas station owner and wholesaler Arco, believes Americans will consume slightly less fuel this summer. He added: "It depends on the price of fuel."

Kotler said that inflation-weary motorists have become more sensitive to price fluctuations in small towns from Massachusetts to Arkansas, home to many of Arco's roughly 1,500 stations. The company has increasingly linked convenience store promotions to gas discounts to entice drivers to keep fueling.

He said, "In some markets where we operate, when the fuel price exceeds $4, people stop driving."