The Memorial Day weekend kicks off the summer driving season, and for many people who have avoided public gatherings during the pandemic, it is a welcome chance to take a trip. Those who take to the roads will likely receive a dividend in the coming days and weeks after seeing retail gasoline prices increase 34.7% since the start of the year.
Based on wholesale gasoline futures, retail gasoline prices should decline roughly 8% in the near term.
Based on wholesale gasoline futures, retail gasoline prices should decline roughly 8% in the near term from the national average retail rack rate of $3.04.
While the disruption to gasoline supplies that followed the hack of the Colonial Pipeline on May 7 led to a retail price increase of 3.2%, that rise will almost certainly be reversed in the coming days as the national average cost of retail gasoline falls below $3 per gallon.
Futures point to a lower price at the pump
Traditionally, the price of retail gasoline tends to rise in late spring, and it peaks around the July 4 holiday in the United States. But given that the U.S. economy is still emerging from the unusual recession set off by the pandemic, and with American households flush with cash, it is anyone’s guess what the summer holiday season will look like.
Forward prices in the oil market imply that the current spot price of West Texas Intermediate at $65.07 will fall by $2.11 per barrel to $62.96 on average during the third quarter, which will capture a good portion of the summer driving season.
Based on current spot and future prices, American households will most likely experience a modest relief in transportation costs following a rough start to the year on pricing.
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