Are Americans Numbing to the Pain at the Pump?
AAA Forecasts Summer National Gas Price Average to Drop to $2.70
CHARLOTTE, N.C. (June 6, 2019) – When it comes to filling-up at the pump, Americans are changing their perception of what they consider “too expensive.” AAA’s 2019 Gas Price survey found that 50 percent of consumers think paying $3/gallon is too high – an increase of 30-cents from last year when half of consumers reported $2.70 as too expensive. 2019’s price point is also 50 cents more than in 2016, when half of consumers thought $2.50 was too much to pay at the pump. With gas price sensitivity lowering over the past three years, Americans are feeling numb to the pain at the pump.
“It appears that many consumers have become numb and are feeling less sticker shock at the pump now because of the high prices they experienced over the last couple of spring seasons,” said Tiffany Wright, AAA Carolinas spokesperson. “Fortunately for Carolinians, we don’t expect to see prices get anywhere close to the $3 mark like some others around the country. In fact, the highest prices of the year could be in the rearview mirror.”
North Carolina’s current average of $2.55 is four cents less than a week ago, five cents less than a month ago and 21 cents less than this time last year. South Carolina’s average of $2.40 is six cents less than a week ago, 14 cents less than a month ago and 20 cents less than it was this time last year.
“While prices have fluctuated from pump to pump across the Carolinas, averages in both states have declined as a whole over the last month and despite strong demand, we expect summer prices to be a little cheaper than last year,” added Wright.
Below is a chart of gas prices on this date over the past four years:
Even with Americans being more tolerant of higher gas prices, you can still expect 74% of Americans to make lifestyle changes to offset increased pump prices. Of those, nearly a quarter (24 percent) say $2.75 is the price that would push them toward changing habits or choices, including:
- Combining errands or trips – 65% (down from 79% in 2018)
- Driving less – 60% (down from 73% in 2018)
- Reducing shopping or dining out – 49% (down from 61% in 2018)
- Delaying major purchases – 43% (down from 50% in 2018)
- Driving a more fuel efficient vehicle – 35% (down from 46% in 2018)
Crude + Demand Factors
This year, the most expensive West Texas Intermediate (WTI) crude oil prices, which AAA tracks to understand impact on pump prices, have ranged between $65 and $66/bbl. Most recently WTI crude fell as low as $53/bbl. That is cheaper than last summer when prices ranged between $65 and $73 per barrel – with most daily prices hovering just under $70 per barrel. Historically, crude oil prices and domestic gasoline demand have determined the price Americans pay at the pump in the summer months. And, that’s no different this summer.
Crude Analysis: The International Energy Agency noted in its May 2019 Oil Markets Report that global crude supply decreased as a result of reduced exports from Canada, Iran and other major crude exporters. If the Organization of the Petroleum Exporting Countries (OPEC) and its partners, including Russia, decide to extend their current production reduction agreement of 1.2 million b/d through the end of 2019, that would further tighten the global crude market. OPEC extending its agreement will also likely lead to increased crude prices that would increase the price of gasoline around the world. It could also entice U.S. crude producers to export more crude, which could tighten supplies in the U.S. and raise retail prices at home. OPEC and its partners will meet on June 25 and 26 in Vienna, where they are expected to announce if the agreement will remain in effect.
Demand Forecast: For domestic gasoline demand, summer 2019 has been forecasted to reach some of the highest levels on record in the U.S. Meanwhile, domestic gasoline stocks are at their lowest level going into June since 2016. If demand rises while gasoline stocks remain low, pump prices could see modest increases, especially if supply is tight in local markets. On the other hand, gas demand could fall, as we’ve seen in recent weeks due to inclement weather from the Rockies to the Midwest and South. Moreover, the added threat of a major hurricane making landfall could also impact demand, which could suppress pump prices.
In its 2019 Atlantic hurricane season outlook, the National Oceanic and Atmospheric Administration’s Climate Prediction Center said that warmer-than-average sea-surface temperatures in the tropical Atlantic Ocean and Caribbean Sea, ongoing El Nino conditions, and an enhanced West African monsoon could produce nine to 15 named storms – including four to eight hurricanes and two to four major hurricanes. An average hurricane season produces 12 named storms, of which six become hurricanes, including three major hurricanes. The mere threat of a hurricane, especially one that threatens the shutdown of Gulf Coast refineries, can dramatically impact the price of crude and gasoline until normal operations resume.
AAA Carolinas, an affiliate of the American Automobile Association, is a not-for-profit organization that serves more than 2.2 million members and the public with travel, automobile and insurance services while being an advocate for the safety and security of all travelers.
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