FocusUS Labor Day travel likely to rise, boosting gasoline market

03 September 2010 19:09  [Source: ICIS news]

By Sheena Martin

HOUSTON (ICIS)--US drivers should travel more in the US Labor Day holiday weekend than they did in 2009, potentially boosting gasoline demand, but the uncertainty of Hurricane Earl's impact adds skepticism to forecasts, industry sources said on Friday.

“Miles will definitely be up over last year,” said Roger Ihne, principal in the oil and gas group at Deloitte Consulting. “One of the most recent factors that might influence this is, of course, the storms off the east coast. The weather always plays an unexpected role, though less so for drivers.”

The American Automobile Association (AAA) projected that the number of Americans travelling this Labor Day weekend - defined as 2 September through 6 September - would be 9.9% higher than 2009. About 34.4m travellers were expected to take a trip of at least 50 miles away from home, compared with 31.3m a year ago.

Ihnes said Earl, despite its path near the population-rich Atlantic seaboard, would not affect drivers as much since they can change travel plans on short notice. For instance, a beach trip could easily be switched to a trip into the mountains.

The AAA said its forecast for increased travel resulted from economic improvement during 2010. While job growth has staggered, US gross domestic product, household net worth and consumer confidence have strengthened. In addition, consumer debt has been reduced.

“While the media reports on the state of the US economy are mixed, many Americans are still interested in taking one more trip as the summer travel season comes to a close,” said Glen MacDonell, director of AAA Travel Services.

At the summer’s start, Phil Flynn - author of online newsletter Energy Report - said that consumer confidence signalled a strong start to the summer driving season. But as the summer progressed, Flynn changed his tune.

“Consumers were very price sensitive, and demand could have been better,” Flynn said. “Based off of data that we are seeing, the economy and the consumer seemed to hit a brick wall mid-to-late summer.”

Flynn said this resulted in lower gasoline demand and reduced miles driven.

Retail gasoline prices could offer another encouraging factor for Labor Day travel. The US average price for regular gasoline dropped for the third straight week, falling 2.2 cents/gal, or 0.8%, according to the Energy Information Administration (EIA).

As of 30 August, the EIA reported the retail price average at $2.682/gal. This was 6.8 cents higher than the same time last year, but was the lowest average for retail gasoline since 22 February.

The AAA said that barring any major tropical storm activity in the US Gulf of Mexico, the expected retail gasoline price for the holiday weekend should range from $2.65-$2.75/gal.

Trips by automobile are expected to jump in popularity, with 91% of travellers, or 31.4m, reaching their destination by driving. That would be up 10.3 % from last year, when 28.5m people travelled by motor vehicle, according to AAA.

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By: Sheena Martin
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