U.S. retail gasoline prices, down 11 percent from a 34-month high on May 4, may keep falling through the Fourth of July weekend as fewer Americans take to the road because of high costs and a slowing economy.
The number of people using their cars during the five-day holiday will fall 3 percent to 32.8 million, Heathrow, Florida- based AAA, the nation's largest motoring organization, said in a June 22 forecast. Yesterday, pump prices averaged $3.55 a gallon, 29 percent higher than a year earlier, according to AAA.
Consumer confidence dropped to a seven-month low in June as Americans grew concerned about the outlook for jobs and wages, the New York-based Conference Board said June 28. The U.S. unemployment rate rose to 9.1 percent in May, the highest level this year, government data showed on June 3. Prices may drop another 5 to 10 cents by mid-July, according to Trilby Lundberg, an energy analyst based in Camarillo, California.
"Gasoline demand for the year is slightly down and the twin reasons are that underemployment is still very deep and we're still paying a price premium of about 80 cents over a year ago," said Lundberg, who conducts a biweekly survey of about 2,500 filling stations nationwide.
Motorists bought an average of 9.33 million barrels a day of gasoline in the week ended June 24, 1.8 percent less than a year earlier, MasterCard, the second-biggest payments network company, said June 28.
"The price environment is still elevated and will be part of consumer consciousness until we get back to around $3.25 a gallon or below," Michael McNamara, vice president of research and analysis for MasterCard Advisors SpendingPulse, said in a telephone interview yesterday. "It's a price story and general economic story."
Retail prices have followed futures markets lower as inventories rose six straight weeks from a 22-month low at the end of April. New York Mercantile Exchange gasoline contracts lost 20 percent of their value from April 29 to June 24.
Rising fuel inventories, lower crude prices and the International Energy Agency's decision on June 23 to release 60 million barrels of oil from strategic reserves will further depress prices, said Tancred Lidderdale, a senior economist for the Energy Department's Energy Information Administration.
The IEA's release from stockpiles held in 28 member nations was meant to ease the losses from Libya, where civil unrest has interrupted oil production and shipments. Libya's output dropped to 150,000 barrels a day in June from 1.585 million daily in December, according to a Bloomberg News survey.
"In our last forecast we said prices would fall toward an average $3.60 by the end of the summer and current gasoline prices are already lower than we forecast," Lidderdale said. "The market looks like it's in a better situation for prices to stay lower than we projected."