For the 28 million Americans expected to hit the road this weekend, lower gasoline prices will give them more money to spend on ice cream, shrimp po’ boys, or a new pair of sunglasses. That may help assuage the frustration of hitting a traffic bottleneck or waiting for a stalled car to be moved.
It will also help people feel better about the economy, since gasoline expenses represent an instant out-of-pocket expense.
On a state-by-state basis, AAA says, the five most expensive places at the gas pump are Hawaii ($3.55 a gallon), Alaska ($3.50), Utah ($3.05), California ($3.04), and Idaho ($3.02). The least expensive states are Missouri ($2.52), Ohio ($2.55), South Carolina ($2.58), Oklahoma ($2.59), and Tennessee ($2.62).
The average US price of regular gasoline is now $2.75 a gallon, according to AAA. This is down from $2.87 a month ago. However, it’s 30 cents a gallon higher than Memorial Day last year – but prices were on the rise then, not falling.
The last time gasoline prices fell leading up to Memorial Day was in 2005, says the Energy Information Administration (EIA). Back then, prices dropped about 10 cents a gallon from the beginning of May to the end of that month.
Behind the recent fall, says Neil Gamson, an analyst at EIA in Washington, is a drop of about $20 a barrel in the price of crude oil. On May 3, a barrel of West Texas Intermediate sold for $86 a barrel on the New York Mercantile Exchange. By May 25, it had dropped to $65 a barrel.
“A lot of the drop is due to the uncertainty around the European debt situation, with the prospects of diminished economic growth in Europe and even the US,” Mr. Gamson says. Reduced economic growth usually means less demand for energy and cheaper oil prices.
At the same time, crude supplies have been plentiful. “There is a big surplus of oil at Cushing,” says Gamson, referring to the Oklahoma storage hub that holds anywhere from 5 percent to 10 percent of US inventory.
Some of that oil is being used to meet rising gasoline demand as the economy has picked up. “Demand is definitely on the upswing, but not overwhelmingly strong,” says Sander Cohan, a gasoline analyst at Energy Security Analysis Inc. in Wakefield, Mass.
Refiners, he says, have increased their output to meet the higher demand. “But there is still capacity available. There is some wiggle room,” he explains.
In past years, the price of gasoline has risen before Memorial Day because refiners have had to produce “summer blends” that burn cleaner. At times the cost of those blends has soared, adding to the price at the pump. But this year, the amount of blended gasoline in storage is larger than the amount of unblended gasoline, says Mr. Cohan. This is giving refiners the ability to react quickly to increases in demand, he adds.
In past Memorial Days, consumers have sometimes watched as gas stations raised prices for the three-day weekend. But this weekend may be different, Cohan says. “There is a lot more competition to sell that gallon of gasoline,” he says.
For many Memorial Day destinations, that’s good news. For example, 30 million people are within a gas tank of the beaches in the New Jersey community of Avalon, notes Scott Wahl, a spokesman for the community. “With gas prices low, it only helps,” he says. “We’re expecting a lot of day-trippers.”
Proof that the low gasoline prices are helping the town: On Friday morning, he says, the streets and sidewalks already had a busy summer-day feel. “I’ve been here since 1979, and this is the most crowded I’ve seen on an early Friday,” he says.