- 03 Jul
Gas prices hot news topic this Independence Day
It seems that everywhere we turn heading into this July 4th weekend we see news stories about the high price of gas. In the Wall Street Journal today the top story in the third section is “Pump Prices Wallop Wallets: Fuel Cost Hits a Holiday High Unseen in Years; ‘It Eats Away at Your Lifestyle”.
Whew – how’s that for an attention grabbing headline!
The article goes on to say that gas prices this holiday season are the highest since the record highs of 2008. The US national average is $3.67 which is $0.20 higher than this same time last year. The average gas price this year is the second highest of the past ten years.
The article attributes the blame to oil investors and traders who are worried that the unrest in Iraq will cause a prolonged increase in the barrel of crude. Iraq was the sixth-largest oil exporter to the US this past April.
Michael Green, a spokesman for AAA, cautioned that drivers may cut back on shopping, dining or going out because the higher gas prices affects their budget. The article emphasizes the point that because of the increased domestic oil production in the past years, the US has near record oil inventories, and so we are not on the same level of dependence as we were in 2008 when oil prices hit $150 a barrel. That means we are buffered from a repeat of 2008 when gas prices hit $5 a gallon in some parts of the country.
The AAA also says the number of Americans expected to drive 50 miles or more during this holiday weekend is 34.8 million people, the highest in seven years.
Another interesting statistic quoted in the article: gas prices dropped an average of $0.21 in June over the past three years, but gas prices rose this year.
What can we take away from all this from a fuel price management perspective?
1. Drivers are expecting to see higher prices at the pump, so they won’t be experiencing sticker shock as they travel this weekend.
2. The US economy continues to improve, and consequently we’ll see more miles traveled this weekend, and more demand than last year’s holiday weekend. That means more volume available to capture overall. Combine the increase in volume with the higher gas prices, and we can expect to see higher fuel revenues this year than last.
3. We know that retail fuel margins suffer during times of retail fuel price increases, and that is proving to be true once again as we compare OPIS reported margins this year to last year. We’ll likely see margins in the range of $0.17 per gallon lower this holiday weekend than last year.
4. The more volatile the rack price, the more at risk you are of losing pennies on every gallon. And with higher gallons available in the market this year, those opportunity losses are amplified.
Only with the rich analysis and rapid speed to the street of fuel price strategies provided by PriceAdvantage can you make the most of the market this holiday weekend, and the entire summer season.