US petrol prices hit fresh records this weekend but, despite the soaring cost, millions of American motorists took to the roads for the unofficial start of summer.
Even as the average cost of a gallon of gasoline broke $4.60 for the first time, around 35mn people were expected to take to the roads over the Memorial day weekend, which traditionally marks the start of America’s summer driving season, according to the AAA, a motoring group.
That would mark a 5 per cent increase on last year’s numbers as holidaymakers indulge in post-pandemic freedom.
“I think it’s all systems go this weekend,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. “There’s an attitude among the public where it’s like: ‘I deserve this’.”
But despite the early summer rush, high prices are beginning to take their toll on motorists. While drivers might be willing to splurge on holidays, they have cut back on day-to-day spending for commuting and social travel.
“We’re starting to see that term ‘demand destruction’ return,” said Kloza.
Petrol prices have climbed rapidly over the past two years as the reopening of the US economy pushed demand to outpace supply. Russia’s invasion of Ukraine in February shook crude markets and accelerated the rise in fuel costs.
With the national average sitting at $4.61 a gallon on Saturday, prices are more than 50 per cent higher than a year ago. In California, they have surpassed $6 a gallon. Diesel is even more expensive.
That has begun to force the US’s gasoline-guzzling drivers to rethink their car usage. The average American family burns through 90 gallons of petrol a month — far more than any in other major economy — which translates to an outlay of $414 at current prices.
Petrol demand in the four weeks to May 20, the most recent data provided by the Energy Information Administration, was 8.8mn barrels a day. That was a 3 per cent slide on the previous week and almost 700,000 barrels below the same period a year ago.
“It definitely appears that high prices are causing what I would say is a low level of demand destruction,” said Patrick DeHaan, head of petroleum analysis at pricing app GasBuddy. He suggested demand over the holiday weekend could be 7-13 per cent lower than 2019.
Rising fuel costs have fed into rampant economy-wide inflation, which has become a serious problem for President Joe Biden, who has been blamed for the high prices by many voters despite a limited ability to influence them.
With midterm elections looming, the Biden administration has taken steps to lower prices, including releasing unprecedented volumes of crude from strategic reserves, lifting restrictions on ethanol blends and leaning on US oil companies and foreign producers to open the taps.
Bloomberg reported last week that the administration was in talks with US refiners about supporting a reopening of some closed refineries. The White House did not respond to a request for comment.
“I do expect him to pull one of these levers at some point,” said Kloza. “They want to be perceived as doing something.”