Americans Start Summer Travel Season Occupied by Record Gas Prices

Millions of Americans hit the road over Memorial Day weekend, with record-high gas prices pinching their wallets.

The national average price for a gallon of regular unleaded gas hit $ 4.62 as of Monday, according to AAA, $ 1.58 higher than a year earlier and about 12% above the pre-2022 high of $ 4.11 set in 2008. Prices have risen about 11% over the past month, the organization’s figures indicated, and gas was recently above $ 4 in all 50 states.

The records at the pump come as Americans are contending with four-decade highs in inflation, paying more for everyday purchases including bread and milk. Analysts said gasoline prices so far have not changed many motorists’ summer travel plans, in part because of pent-up demand for travel after Covid 19-related restrictions.

“People have decided, ‘Look, I’ve been good. I’ve been hunkering down for two years. I’m gonna go, and I’m gonna go big, ‘”said AAA spokesman Andrew Gross. The organization said in May that 34.9 million Americans were expected to travel by automobile during Memorial Day weekend, up 4.5% from 2021.

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Still, some motorists say they are reconsidering summer road trips. A survey by AAA in March found that two-thirds of Americans felt gas was too expensive when it was at $ 3.53 a gallon; if it were to reach $ 5 — which has happened on the West Coast — three-quarters of drivers said they would need to adjust.

Amalia Velázquez, a single mother of three boys who lives in San Diego, is not sure whether she will be able to take her children to visit their grandmother to celebrate her birthday in June. Gas prices have cut into Ms. Velázquez’s budget, and her mother lives about 120 miles away in Mexicali, Mexico.

Ms. Velázquez said she currently spends $ 80 to fill her 2019 Toyota RAV4, up from about $ 45 before the pandemic. For now, Ms. Velázquez and her sons are spending less money eating out to save money.

“I do not think I’ll be making that drive anytime soon,” she said of the trip to Mexico.

Gasoline prices vary significantly by location based on taxes and access to energy infrastructure. Drivers in California are currently paying the most of any state on average, at $ 6.17 a gallon, an increase of $ 1.96 from last year, according to AAA. The states with the next highest average prices, Hawaii and Nevada, were also recently above $ 5 a gallon.

Meanwhile, in Oklahoma, Kansas and Arkansas — the states with the lowest current average prices — gas was still around $ 4 a gallon, though about 50% higher than last year.

Gasoline prices rise and fall based on a range of factors. While crude-oil prices have backed off 2022’s March highs, they still remain around $ 120 a barrel, or around 70% higher than a year ago. Oil inventories were already tight because of demand caused by economic reopening; Russia’s invasion of Ukraine has further upset the market.

In the US, refining capacity declined during pandemic-driven lockdowns and restrictions. The market has lost about one million barrels of daily petroleum-refining capacity since early 2020, when the US was producing about 19 million barrels of refined petroleum a day.

Analysts are closely tracking the health of the American consumer. Jake Remley, senior portfolio manager at Income Research + Management, said household cash balances remain strong, thanks in part to pandemic monetary stimulus. Recent economic data, however, suggest wage growth is slowing.

“We’ve got some cushion here, and it’s starting to get eroded,” Mr. Remley said.

Analysts say fuel prices could come down if China’s Covid-19 cases lead to further lockdowns or travel restrictions, reducing demand for oil, or Russia and Ukraine reach a cease-fire agreement. They are also watching whether consumers adjust driving habits amid higher costs.

Gasoline prices have been the subject of political debate, putting pressure on the White House. In response, President Biden has released strategic reserves and passed mandates to increase the amount of ethanol blend in fuel in a bid to reduce fuel prices. US officials said last week that Mr. Biden hadn’t ruled out a ban on petroleum exports.

Other refined products have risen even more sharply, with diesel gaining more than 70% so far this year, AAA data shows. Higher diesel prices mean higher input costs for trucks and tractors. Tom Kloza, global head of energy analysis for energy information-services company OPIS, said consumers can expect those costs to reach their pocketbooks.

“It’s not going to be as much of a trickle; it’s going to be more like Niagra Falls as the increases start to come in, ”said Mr. Kloza. OPIS is owned by Dow Jones & Co., owner of The Wall Street Journal.

With gasoline prices on a wild ride, many consumers are exploring whether buying an electric vehicle could save them money in the long run. WSJ’s George Downs breaks down four factors to consider when buying a new car. Composite photo: George Downs

Some consumers are switching vehicles to moderate fuel costs. Tom VanStavern, a motorbike-shop owner in Columbus, Ohio, used to pick up his 8-year-old son from school in a 2015 Ford Transit van that gets 15 miles a gallon. Now, he says, he uses a 2001 Kawasaki motorcycle with a sidecar, which gets about 45 miles a gallon.

Average gas prices in Ohio are $ 4.45 a gallon, up $ 1.50 from last year.

“Normally for work, I have to drive a van,” said Mr. VanStavern. “It’s gone from being like $ 60 to fill up to being $ 100, so now I drop the van off at home.”

The Tough Summer Travel Season

Write to Hardika Singh at hardika.singh@wsj.com

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