Drivers Won't Suffer at Gas Pump From Oil's Rise

Some 34 million U.S. drivers are planning a road trip this holiday weekend, and are likely to pay the lowest Memorial Day gasoline prices in 11 years. ENLARGE
Some 34 million U.S. drivers are planning a road trip this holiday weekend, and are likely to pay the lowest Memorial Day gasoline prices in 11 years. Photo: Reuters

The sharpest rise in oil prices in seven years isn’t expected to bring much pain at the gas pump.

Even as crude oil prices hit $ 50 a barrel on Thursday, after having fallen below $ 27 about three months ago, a near-record 34 million U.S. drivers are planning a road trip this holiday weekend, according to AAA. They are likely to pay the lowest Memorial Day gasoline prices in 11 years.

Gasoline prices are 16% cheaper today than the last time oil was at $ 50 a barrel in November. Refineries have been running hard this year, with fewer outages than a year ago. That keeps gasoline supplies healthy and blunts the impact of rising crude prices.

“This isn’t going to be the next gasoline apocalypse,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service.

Gasoline is more expensive than it was three months ago, with the national average for regular now at $ 2.31, according to AAA. Pump prices are up 33% from their recent low in mid-February, which came just as oil futures crashed to their own 13-year low. But that rebound in gasoline prices hasn’t been as severe as the 89% rise in crude prices over the same period.

One Houston resident, Javier Abundis, said Thursday he still isn’t worried about fuel prices, though he drives an SUV. He’s planning a trip to Mexico next week and thinks the drive will probably cost only $ 140 round trip.

“It’s cheap,” he said. “I know it’s not going to last, so we just try to enjoy it.”

U.S. households are still likely to save $ 160 billion in 2016 compared with what they spent on gasoline two years ago, when oil prices were more than $ 100 a barrel, according to Jason Thomas, director of research at private-equity firm Carlyle Group. CG -1.93 %

The savings is equivalent to a 2.6% raise in the median household income of $ 51,900 in 2014, according to Citigroup. C -1.77 % AAA estimates the savings at about $ 700 per licensed driver, even with crude prices on the rise.

There is often a lag between rising oil futures prices and those at the filling station. But many analysts don’t expect gasoline prices to go up fast enough to dissuade Americans from driving or buying cars at what has been a record pace this year. Many who predict record consumption and vehicle purchases this year had also expected oil futures to rise above $ 50.

About half of the drivers surveyed recently by AAA said that $ 2.50 a gallon would be “too high” a price for gasoline. Retail prices jump about 25 cents for every $ 10 change in crude futures, according to AAA, so oil would have to get to nearly $ 60 a barrel for drivers to start to balk at the cost of filling up.

It may never get there this year. Many U.S. oil producers have planned to sell production or increase output as oil breaches $ 50 and nears $ 60, so some analysts expect that will cap the rally soon. Gasoline prices also usually peak around Memorial Day as refineries end traditional spring maintenance and run hard to fill the higher demand in the summer-driving season, analysts said.

“Don’t cry for consumers,” Mr. Thomas said. “They’ll do just fine.”

Write to Alison Sider at [email protected] and Timothy Puko at [email protected]


WSJ.com: US Business

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