The unofficial end of summer is a good time to consider how much things have changed for American motorists.
It wasn’t too long ago that it was almost guaranteed that drivers would have to pay more for gasoline from Memorial Day to Labor Day. This was the legend of the “peak driving season.”
The only question was: How much would family vacations be impacted by the higher price of fuel?
It was also a macro-economic question.
If fuel prices rose too much, people wouldn’t travel by car; airlines would raise fares; hotels, restaurants and vacation spots would be hurt, and the economy as a whole would suffer.
Boy, how things have changed!
Much like the summer of 2018, this past summer saw gasoline prices decline.
I pulled up some numbers from the US Energy Information Administration (EIA) and what happened is stunning. Back in May – when energy speculators were itching for costs to rise — the price of a gallon of gasoline in the US averaged $2.95 a gallon.
Watch out! The word around the financial community and in the press was that prices this summer would easily top $3 a gallon.
I wasn’t buying it. And neither was the EIA, which was predicting that gas prices would drop during the summer. Back in April I even wrote a column that started: “Gas prices will decline as we head into summer. Just like last year.”
“And while the drop in prices is good news for drivers, it sucks for Wall Street,” that column continued.
Well, it happened just like the EIA predicted.
By July, the price of gas averaged $2.82 a gallon and by August — the last month for which numbers are available — it had declined to $2.77 a gallon.
And keep in mind, those prices include all taxes. So, market forces weren’t the only thing controlling how much you paid. Our needy politicians looking to close budget gaps were also contributing to the price.
Also remember that prices were declining even as tensions in the oil-producing world were escalating. Venezuela, a major oil producer, is still having big problems. And tension in the Middle East, mainly involving Iran, were, and still are, getting worse.
And prices still went down. Now that the “peak driving season” is over, prices will likely to come down even more. The EIA is expecting the average price of gasoline to fall to $2.64 a gallon.
What’s going on?
First, there’s the fact that demand for gasoline worldwide is declining. That’s partly because other parts of the world have slowing economies, which cause lower gasoline demand. But it’s also because people are moving away from conventional gasoline engines.
The Wall Street Journal recently noted that German auto supplier Continental cut its investment in conventional auto parts because people are moving to electric cars.
More fuel-efficient hybrid engines also cut the demand for gasoline.
And while this long-awaited and highly-desired fuel efficiency increase was happening, there was also a hike in the supply of oil and gasoline thanks to new technology like fracking.
That’s the good news.
The bad news? The EIA is predicting that gasoline prices by June 2020 will be higher than they were this summer — averaging $2.96 a gallon, to be exact.
But what does the EIA know?!
Read it from NYPost – Photo as posted in NYPost (Shutterstock )
