Travel demand, crude oil market will put pressure on prices leading up to Memorial Day
BOISE – (March 28, 2019) – Since February 18, Idahoans have had the good fortune of paying less for fuel than drivers in many other states. But that will likely come to an end in a matter of weeks. According to AAA’s latest projections, gas prices in the Rockies region are expected to exceed the national average by Memorial Day. But there’s some good news – overall, prices are expected to stay below 2018 levels.
AAA predicts that this spring, the U.S. average price will top out near $2.75 per gallon, about 20 cents cheaper than last spring’s high of $2.92. Gas prices in the Gem State are typically 25 to 30 cents higher than the national average, which means Idahoans could pay close to $3 per gallon at the beginning of the summer travel season.
“In our region, fuel prices can move pretty dramatically with the seasons – in the winter, there’s abundant supply and less demand, so prices usually relax, but the reverse tends to happen heading into the summer,” says AAA Idaho spokesman Matthew Conde. “We’ve enjoyed a nice discount at the start of the year, but we expect Idaho prices to slingshot back above the national average soon. Pump prices could jump another 50 cents before it’s all said and done.”
Currently, the U.S. average is $2.69, which is 27 cents more than a month ago, and four cents more than a year ago. Meanwhile, Idaho’s average gas price is $2.53, which is 23 cents more than a month ago, but 25 cents less than a year ago. Today, Idaho’s fuel price is 16 cents below the national average price, and 32nd in the country for most expensive fuel. Utah currently has the cheapest fuel in the nation at $2.35 per gallon.
Oil price dynamics
Tightening global supply is expected to drive crude oil prices higher, impacting gas prices in the process. OPEC (Organization of the Petroleum Exporting Countries) delegates will meet in June to decide if agreed-upon production cuts should continue, or if they have successfully removed the excess oil from the market. Turmoil in Venezuela and Iran could restrict supplies even further.
“OPEC’s action may have had some unintended consequences. U.S. crude oil production has increased by 2 million barrels per day, exceeding the 1.2 million barrel production cut that OPEC put into place,” Conde said. “With the United States expected to surpass Saudi Arabia and become the #2 oil exporter in the world, domestic activity may help to stabilize prices.”
Today, the West Texas Intermediate benchmark is trading at $60, 14 dollars more than January 1. The price for a barrel of oil is expected to reach $65 sometime in the next 90 days. As a rule of thumb, every $1 increase in the WTI yields a 2.4 cent per gallon increase in gas prices.
In addition to volatility in the crude oil market, seasonal refinery maintenance and the upcoming switch to summer-blend fuel could also cause gas prices to climb. Summer-blend fuel is more expensive to produce because it is formulated to resist evaporating at higher heat.
Meanwhile, AAA expects the robust travel demand of recent years to continue. If demand depletes the available fuel inventory faster than it can be replaced, gas prices will likely rise.
Gas prices expected to stay below 2018 levels
“Even though gas prices are on the move, there’s room for optimism,” Conde said. “Barring unforeseen circumstances, we expect prices to stay cheaper than last year, which should keep some money in Idahoans’ wallets.” Last year, the Gem State’s most expensive average price was $3.26 on August 24.
AAA recently conducted a survey to see what motorists would do with the money they might save on gas this year. Nearly half of the respondents said that they would put the money into savings, while a third said that they would go on at least one more road trip than they had expected to this year. About a quarter of the respondents said that they would extend a road trip that’s already been planned for this year.
“If prices are a little cheaper than they were last year, it’s a step in the right direction,” Conde said. “Most travelers will take a ‘glass half-full’ approach and hit the road.”