Record Gas Prices Hit Americans’ Start to Summer Travel Season

Millions of Americans hit the road over Memorial Day weekend, with record gas prices tightening their pockets.

According to AAA, the national average price for a gallon of conventional unleaded gas hit $4.67 on Wednesday, $1.63 higher than a year earlier and about 14% above its pre-year high. 2022 is $4.11 set in 2008. Prices are up about 12% month over month, the organization’s figures show, and recently above $4 in all 50 states.

The records at the pump come as Americans, facing the highest inflation in four decades, pay more for everyday purchases that include bread and milk. Gasoline prices have so far remained flat on many motorists’ summer travel plans, analysts say, due in part to pent-up demand for travel following Covid-19-related restrictions.

“People decided, ‘Look, I’ve been good. I studied for two years. I will go, and I will grow,” said AAA spokesman Andrew Gross. The organization said in May that 34.9 million Americans are expected to travel by car over Memorial Day weekend, up 4.5 percent from 2021.

However, some motorists say they are rethinking summer road trips. An AAA survey in March found that two-thirds of Americans felt gas was too expensive when it was $3.53 a gallon; if it reaches $5 — which has happened on the West Coast — three-quarters of drivers said they would need to adjust.

Amalia Velázquez, a single mother of three boys living in San Diego, isn’t sure if she will be able to bring the children to visit her grandmother for her birthday in June. Gas prices have cut the budget for Velázquez and her mother, who lives about 120 miles away in Mexicali, Mexico.

Ms. Velázquez said she now spends $80 on her 2019 Toyota RAV4, up from about $45 before the pandemic. Currently, Ms. Velázquez and her sons are spending less to eat out to save money.

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

Gasoline prices vary considerably by location based on taxes and access to energy infrastructure. California drivers are currently paying the highest average of any state, at $6.19 a gallon, up $1.99 from last year, according to AAA. The next highest average price states, Hawaii and Nevada, were also recently above $5 a gallon.

Meanwhile, in Oklahoma, Kansas and Arkansas — the states with the lowest average prices today — gas is still at about $4 a gallon, although about 50% higher than last year.

With gas prices soaring, many consumers are looking to see if buying an electric car can save them money in the long run. The WSJ’s George Downs broke down four factors to consider when buying a new car. Photo compilation: George Downs

Gasoline prices rise and fall based on a range of factors. While crude oil prices have retreated to their March 2022 highs, they have remained around $116 per barrel, about 65% higher than a year ago. Oil inventories are already tight because of demand as the economy reopens; Russia’s invasion of Ukraine has upset the market.

In the US, refining capacity has fallen during shutdowns and restrictions caused by the pandemic. The market has lost about a million barrels of daily refining capacity since the start of 2020, when the US produced about 19 million barrels of refined oil per day.

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Analysts are closely monitoring the health of US consumers. Jake Remley, senior portfolio manager at Income Research + Management, said household cash balances remained high, thanks in part to the pandemic monetary stimulus. However, recent economic data suggests wage growth is slowing.

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

Analysts say fuel prices could fall if China’s Covid-19 outbreak leads to further closures or travel restrictions that reduce demand for oil or Russia and Ukraine reach a truce. They are also looking at whether consumers will adjust their driving habits in light of higher costs.

Gas prices have been the subject of political debates, putting pressure on the White House. In response, President Biden released strategic reserves and approved mandates to increase the amount of ethanol blends in fuel to reduce fuel prices. US officials last week said Mr Biden was not ruling out a ban on petroleum exports.

New York on Wednesday became the latest state to suspend the gas tax, suspending taxes on conventional gas and diesel through the end of the year.

Other refined products are up even stronger, with diesel up more than 70% so far this year, AAA data shows. Higher diesel prices mean higher input costs for trucks and tractors. Tom Kloza, global head of energy analysis at energy information services company OPIS, said consumers can expect those costs to come out of their pocket.

“It won’t be too drippy; it will be more like Niagara Falls when the rise starts to appear,” said Mr. Kloza. OPIS is owned by Dow Jones & Co., owner of The Wall Street Journal.

Some consumers are turning to vehicles with moderate fuel costs. Tom VanStavern, a motorcycle shop owner in Columbus, Ohio, used to pick up his 8-year-old son from school in a 2015 Ford Transit van with a capacity of 15 kilometers a gallon. Now, he says, he’s using a 2001 Kawasaki motorcycle with a sidecar, going about 45 miles per gallon.

The average gas price in Ohio is $4.61 a gallon, up $1.65 from last year.

“Usually to go to work, I have to drive a truck,” Mr. VanStavern said. “It went from $60 to fill up to $100, so now I leave the van at home.”

The harsh summer travel season

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

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https://www.wsj.com/articles/americans-start-summer-travel-season-beset-by-record-gas-prices-11654037695?mod=rss_markets_main Record Gas Prices Hit Americans’ Start to Summer Travel Season

Edmund DeMarche

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