Gas prices have come off their peak over the past month and are poised to fall further over Memorial Day weekend as millions of travelers hit the road.
AAA projects that 43.8 million travelers will head 50 miles or more from home over the Memorial Day holiday travel period, a 4% increase from last year.
“It may be counterintuitive but I believe we’ll see lower prices into the weekend,” Tom Kloza, global head of energy analysis at OPIS, told Yahoo Finance.
On Friday the national average for gasoline stood at $3.61 per gallon, down $0.05 from one month ago, according to AAA data.
“Retail [gasoline] ultimately follows wholesale and wholesale prices have been slipping well below the numbers seen in the last 3-6 weeks,” Kloza said.
The analyst points out the price of gasoline on the wholesale market has been sliding because of the perception that oil supply is slightly outpacing demand. In the last 90 days, the market has seen slight accumulation of inventory in both crude and gasoline.
Andy Lipow, president of Lipow Oil Associates, agreed drivers will likely see some relief at the pump.
“For most of the country, I expect that gasoline prices to fall $0.05 over the next few days,” he said.
Prices at the pump have been on a downward trend since peaking in early April amid falling demand and easing oil prices.
Despite the decline, prices are expected to rise this summer by about $0.10 per gallon as refinery capacity falls, according to the Energy Information Administration.
“US retail gasoline prices will average about $3.70 per gallon for the summer driving season, which runs from May to September when the United States will have 3%, or 620,000 barrels per day less refinery capacity compared with the 2019 peak,” said a recent Energy Information Administration report.
Others have more muted forecasts. GasBuddy head of petroleum analysis Patrick De Haan expects prices to stay in the mid-$3 per gallon range.
“I don’t think we’ll see an average of $3.70, There’s certainly is risk in the month of August — a major hurricane could impact prices,” said De Hahn.
Earlier this week the Biden administration announced it will sell 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve. The stockpile was set up in 2014 after Hurricane Sandy. The reserve’s closure was included in legislation signed in March by the President.
The sold fuel will be transferred or delivered no later than June 30, ahead of the July 4 holiday.
“By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the Tri-state and Northeast at a time hardworking Americans need it the most,” US Secretary of Energy Jennifer Granholm said in a release.
The measure could have a limited impact on prices since on average the US consumes roughly 9 million barrels of gasoline per day, says Kloza.
US oil futures have come off their April peak amid increasing diplomatic efforts towards a cease fire in the Middle East. Wavering sentiment over expectations for a rate cute from the Federal Reserve also put a lid on crude prices.
“The higher for longer interest rates look to be here to stay and global growth expectations are being trimmed,” wrote Dennis Kissler, senior vice president at BOK Financial, in a note to clients.
Analysts also expect oil alliance OPEC+ to extend its production cuts beyond June amid declining crude prices and rising inventories.
On Friday, West Texas Intermediate (CL=F) traded just below $77 per barrel, while Brent (BZ=F) crude, the international benchmark price, exchanged hands near $81.10 per barrel.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
