We are heading into Memorial Day weekend, and the official start to the the summertime driving season. Gasoline prices, along with a related exchange traded fund, have dipped from their April highs, a boon to travelers but not so much for investors.
Travel group AAA projected that about 30.74 million people will travel 50 miles or more away from their homes between May 24 and 28, up 1% year-over-year, while the government estimates U.S. summer gasoline prices will average $3.79 per gallon, or 8 cents higher year-over-year, reports Selam Gebrekidan Reuters. According to AAA, the current average price of regular gasoline at the pump is $3.67. [Is the Gasoline ETF Past Its Peak?]
In the week ended May 18, gasoline demand was at 8.63 million barrels per day, its weakest for May since 2003.
“The overall tone in the gasoline market is that we’ve already reached the highest point and prices will continue to drop,” Ben Brockwell, director of data, pricing & information services with Oil Price Information Service OPIS.L, said in the article.
Patrick DeHaan, senior petroleum analyst at GasBuddy.com, believes that as refineries switched gas formulations between the winter and summer months, disruptions in production caused a predictable uptick in gasoline prices, reports Meg Handley for U.S. News. With the transition over, prices have come back down.
“The switchover to summer gasoline has been made and now that’s behind us there’s not quite as much pressure for refineries,” DeHaan said. “Supply of summer gasoline is starting to increase and that leads to lower pressure on gas prices.”
However, speculators are already thinking about an upside.
“That’s making people wonder if we’re going to see any kind of demand rebound this summer,” Brockwell added.
The easing prices at the pump may also reflect the weakness in crude oil as global economic growth wanes, notably in Europe and China, and easing tensions over Iran’s nuclear program.
Manufacturing data from Europe and China reveal a sharper slowdown in the world economy and lower demand for crude, reports the Associated Press. Italy and Spain have already fallen into recession.
WTI crude is hovering around $90 per barrel.
U.S. Gasoline Fund
Max Chen contributed to this article.