WASHINGTON—In the past two weeks, the national average for a gallon of gasoline has risen over 20 cents to $4.37, surpassing the record set on March 11, according to AAA. The increase is primarily due to the high cost of crude oil, which was hovering near $100 a barrel last week. Diesel set a new record of $5.55 a gallon.
Oil prices were down 88 cents, or 0.8%, at $105.06 a barrel on Tuesday at 0924 GMT, while U.S. West Texas Intermediate crude fell 75 cents, or 0.7%, to $102.34 a barrel, reports Reuters. Oil prices are falling as the market balances the impending European Union sanctions on Russian oil with demand concerns related to coronavirus lockdowns in China, a strong dollar and growing recession risks.
“With the cost of oil accounting for more than half of the pump price, more expensive oil means more expensive gasoline,” said Andrew Gross, AAA spokesperson.
According to new data from the Energy Information Administration, total domestic gasoline stocks decreased by 2.2 million barrels to 228.6 million barrels last week. However, gasoline demand increased slightly from 8.74 million barrels per day to 8.86 million barrels per day. Increasing gas demand and rising oil prices have pushed pump prices higher. Pump prices will likely face upward pressure if oil prices remain above $105 per barrel, says AAA.
Inflation plus high gas prices have made summer travel expensive, and some Americans are rethinking summer vacation plans, reports the Wall Street Journal. Close to 70% of Americans surveyed by Bankrate said they are changing their summer travel plans due to inflation.
“You could see pockets of weakness [due to inflation], but I think there is still good upside for the travel sector,” Aneta Markowska, chief economist at Jefferies LLC, told the Journal. “There is still a lot of pent-up demand, there’s still a lot of firepower in terms of the ability to pay even though prices are higher.”
However, April’s consumer-confidence survey by the Conference Board showed that the number of respondents who plan to take a vacation in the next six months dropped to its lowest level since last spring.
But Ashley Schroeder, an assistant professor in tourism management at the University of South Carolina, told the Journal that higher gas prices haven’t stopped people from traveling altogether.
“It changes where and how they travel,” she said, for instance by taking fewer trips, driving to destinations closer to home, and spending less on recreation and dining. A Bank of America poll showed that 40% of the 1,055 respondents said higher gas prices would cause them to travel less, while 28% said they could take shorter trips to offset higher prices.
NACS’ most recent blog post, “Is Gas Tax Relief a Good Idea?” discusses how easing consumer pain at the pump is a good idea, unless it causes more problems.
The Convenience Matters podcast episode “What’s the Tipping Point for Gas Prices?” explores how much pain at the pump that consumers will tolerate and what’s ahead for the summer driving season.
Here’s how to explain to customers why gas prices aren’t dropping quicker when the price of crude oil does drop.