Gasoline demand in the U.S. is expected to be robust over the Thanksgiving Day holiday, with travel projected to reach a seven-year high on a cheerier consumer smiling as retail gasoline prices hover at a four-year low.
“Holiday joy has come early this year with Americans likely to pay the lowest Thanksgiving gas price since 2009. Lower prices are increasing disposable income and enabling families to carve out more money from household budgets for travel this Thanksgiving,” said Marshall L. Doney, AAA president and chief operating officer
As of November 17, the U.S. retail gasoline price average was $2.894 gallon according to the Energy Information Administration, with many regions in the country showing a lower pump price.
The U.S. gasoline average dropped seven straight weeks through November 17, and moved lower in 10 of the past 11 weeks. The average is down 81.9 cents or 22.1% from its peak in 2014 at $3.713 gallon reached April 28.
North America’s motor club and leisure travel organization expects 41.3 million people will take a road trip of 50 miles or more over the holiday, 1.7 million or 4.3% higher than during the Thanksgiving Day holiday in 2013.
“Americans are more optimistic about the future as improvements in several key economic factors, including employment, GDP and disposable income, are boosting consumer confidence and the desire to travel,” said Doney.
U.S. consumer confidence recently reached a seven-year high and the national unemployment rate fell to 5.8% in October—the lowest it’s been in more than six years, albeit a lower participation rate has accelerated the decline. The initial reading of U.S Gross Domestic Product for the third quarter also surprised to the upside, showing annualized growth of 3.5%, with minutes of the U.S. Federal Open Market Committee meeting from October indicating officials think the U.S. economy is strong enough to withstand global economic headwinds, including sluggish growth in the euro zone, slowing growth in China while Japan’s economy has entered recession.
Historically, lower gasoline prices elicit increased demand, and evidence is mounting that this corollary remains in force.
The Energy Information Administration (EIA) has now reported implied gasoline demand has averaged more than 9.0 million barrels per day (bpd) during the three weeks ended November 14. That string of plus 9.0 million bpd in demand hasn’t occurred since May when it ran for four weeks.
Typically implied demand climbs ahead of a travel holiday, as suppliers and wholesalers position product closer to retail outlets for quick resupply. Should that pattern have continued we would see strong demand for third week of November, with the trend in place to continue through the holiday weekend. Low gasoline prices could also spur greater demand ahead of December holidays.