28 May 2010 16:38 [Source: ICIS news]
By Sheena Martin and Ben DuBose
HOUSTON (ICIS news)--A slight increase in US summer driving will not jump start flagging gasoline prices, industry consultants and analysts predicted on Friday.
The three-day Memorial Day holiday weekend (29-31 May) marks the start of the US driving season, which runs through the Labor Day holiday on 1 September.
The American Automobile Association (AAA) said it expected a 5.4% increase in travellers during the holiday weekend, with automobile trips up 5.8% from the same period last year. That would add 1.6m to the 30.5m who travelled in 2009.But the boost in driving was unlikely to have a large impact on gasoline prices as a result of supply and demand fundamentals, market analysts said.
The US was awash in gasoline, according to supply statistics, and summer driving was predicted to remain much lower than what it was two years ago.
The US Energy Information Administration's (EIA) Gasoline Summer Consumption and Supply report predicted an increase of just 0.9% in gasoline consumption this summer, but gasoline stocks were about 7m bbl (3%) higher than the start of the 2009 driving season.
Industry consultants said the increase in summer driving from last year's levels was a sign of an improved economy.
"We continue to see an uptick in leisure travel as consumer confidence in the economy and job security strengthens," said Adam Weissenberg, vice chairman and leader of the tourism, hospitality and leisure sector for Deloitte.
A commissioned survey from Deloitte, polling more than 1,000 ?xml:namespace>
But more autos on the road were unlikely to translate into higher gasoline prices, according to industry sources.
Moreover, AAA said that retail prices would hit their entire summertime peak over the upcoming weekend, signalling stable or declining prices despite a typically high-demand season.
“Right now, gasoline consumption is well below levels of just two years ago,” said US Energy Information Administration (EIA) analyst Tancred Lidderdale. “Consequently, gasoline prices are being driven by changes in crude oil prices, which are influenced by global supply and demand, and we would not expect changes in
“Inventories should not be materially affected if there are unexpected consumption spikes during the Memorial Day or Labor Day weekends,” EIA analyst Michael Morris said.
“Nor do we foresee robust year-over-year growth in motor gasoline demand during the summer as a whole.”
As a result of large gasoline stocks, prices of crude oil and subsequently gasoline took their dramatic slide in recent weeks.
“I think that because we have an ample supply if gasoline, we can see continued downward pressure on the futures markets and the price at the pump,” said Phil Flynn, author of online newsletter Energy Report. “I think it’s obvious right now that the euro, which has been supportive of higher energy prices, is not going to regain its former glory any time soon.”
One bright spot for producers, however, could be the
“At the wholesale level, ethanol has been selling at a 50-70 cent/gal discount to gasoline before the 45 cent/gal blender’s credit is taken into account,” the RFA said. “At a 10% (E10) ethanol blend, that translates to significant savings.”
The group said drivers were saving as much as $105/year as a result of ethanol-blended fuel, which could boost demand and margins for ethanol makers.
Cheaper fuel prices, along with improving consumer confidence, would be largely responsible for the boost in summer travellers, said the Energy Report's Flynn. He said that signalled a strong summer driving season.
“When Americans feel a little better about the economy, the first thing Americans do is pack up the kids in the minivan and go somewhere,” Flynn said.($1 = €0.81)
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