Inflation-adjusted – or real – gasoline prices in the United States heading to the Memorial Day weekend are at their highest in a decade, at a national average of $4.59 per gallon, the Energy Information Administration said on Friday.
On a nominal basis, this price is the all-time high price for gasoline recorded in EIA’s weekly Gasoline and Diesel Fuel Update, which dates back to 1990.
High crude oil prices, the effect of the Russian invasion of Ukraine on the crude and fuel markets, and U.S. gasoline demand exceeding refinery runs are the key factors driving the record-high gasoline prices in nominal terms, the EIA noted.
Some 1 million bpd of refinery capacity in America has been shut permanently since the start of the pandemic, as refiners have opted to either close losing facilities or convert some of them into biofuel production sites.
In the United States, operable refinery capacity was at just over 18 million bpd in 2021, the lowest since 2015, per EIA data.
Per EIA’s update on Friday, gross inputs into refineries are only slightly above the five-year average even though refinery utilization is at the top of the five-year range. This indicates that refineries may be running closer to maximum capacity utilization than gross inputs alone would indicate. Moreover, the faster increase in gasoline demand compared with production has led to inventories draws, with U.S. gasoline inventories now 8% below the five-year average for this time of year, the EIA noted.
U.S. gasoline prices have been setting daily records for most of May, although prices inched down on May 27 from the record high of $4.600 on May 26, per AAA data.
“Rising prices are not deterring travel’s resurgence this Memorial Day weekend, with travel volumes expected to reach 92% of pre-pandemic levels in 2019,” AAA said in a forecast. More than 39 million people are expected to travel 50 miles or more from home during the 2022 Memorial Day holiday weekend—3 million more than 2021, according to the estimate.
[ZH: Bear in mind that despite wage growth, gasoline prices have outstripped them dramatically so that the average hours work for an American now only buys 7 gallons of gas… less than half the 17 gallons that the same amopunt of labor could buy in early 2020]
Still, there may be some early signs that high gasoline prices may have started to destroy some demand.
On Thursday before the Memorial Day holiday weekend, gasoline demand was 4.3% higher from a week ago, or 5.4% higher than the four-week average, according to data from fuel-savings app GasBuddy. Considering that it’s just ahead of the holiday weekend, it’s “Pretty lackluster and signs that demand destruction is hitting the Memorial Day weekend,” Patrick De Haan, head of petroleum analysis for GasBuddy, said.