Good news for motorists as millions prepare to hit the road
Despite rising oil prices in recent weeks, motorists hitting the road this weekend for the unofficial start of summer can still expect to find cheap gas.
The average national price for a gallon of regular unleaded gas is $2.28, according to AAA. Although that is up 15 cents since April and the highest level since October, prices at the pump remain well below the $2.75 a gallon drivers were paying around this time last year. The U.S. Energy Information Administration expects gas prices to sink back toward $2 a gallon by year-end.
AAA estimates that 38 million people will be traveling over the Memorial Day weekend, which would be the second-highest total on record, with most of those vacationers expected to drive to their destinations.
The recent increase in gas prices is due to the rise in crude, which has doubled over the past three months amid supply disruptions caused by raging wildfires in Canada and political instability in Nigeria, a major oil producer.
A barrel of benchmark West Texas Intermediate crude traded Friday at $49.23, up from less than $30 a barrel in February.
"The Canada wildfires curtailed quite a bit of production," said Anthony Starkey, manager of energy analysis at Platt's Analytics. "Then there's the emergence of that new militant group in Nigeria that has been disrupting production in West Africa... The big question obviously is how prolonged those supply outages might be."
Global supplies are ample enough to keep gas prices from surging, with record amounts of crude remaining in storage and producers such as Saudi Arabia showing no signs they plan to curb production. Iran has also been ramping up its oil industry in the aftermath of the Obama administration's decision to lift economic sanctions, while Iraq and Libya are also eager to boost their outputs.
Starkey expects oil prices to remain at or near their current levels by the end of the year. He also expects gasoline prices to remain "relatively steady."
Wall Street keeps close tabs on gas prices since they can serve as a proxy for consumer sentiment.
"If oil prices are moving and not much else is happening in the consumer world, then they can be very closely correlated," said Scott Hoyt, an economist at Moody's Analytics. "Right now, I suspect that consumers are a bit more interested in what's going on with the stock market and what's going on with wages, especially since even with the increases that we have seen gasoline prices still seem low."