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Americans are set to pay the lowest gasoline prices in five years this Christmas, but that won’t be a major factor for fuel demand year, with concerns about the spread of COVID-19 expected to result in a decline in travel of at least 29% this holiday season.
“Typically, cheaper gas prices are an incentive for last minute trips, especially around the holidays,” said Jeanette McGee, AAA spokesperson, “but the lower prices and less traffic aren’t driving decisions to hit the road.”
“Instead, Americans are looking to the public health landscape, including COVID-19 case numbers, to make their travel decisions,” she said in a statement, when leisure travel information provider AAA issued its holiday travel forecast earlier this week.
AAA expects at least 34 million fewer travelers during the Dec. 23 through Jan. 3 holiday travel period, compared to the same time a year ago — a decline in travel of at least 29%.
Most of those who do travel will do so by car, with road trips accounting for 96% of holiday travel, AAA said, estimating that up to 81 million Americans will travel by car, down at least 25% compared to last year.
The national average for retail regular unleaded gasoline prices are forecast at $2.19 a gallon on Christmas Day, which would be the lowest since 2015, and second lowest in the last decade, according to Patrick De Haan, head of petroleum analysis at GasBuddy.
Prices stood at $2.204 on Thursday afternoon, GasBuddy data show. That’s down nearly 36 cents a gallon from a year ago. On the New York Mercantile Exchange, the front-month January gasoline futures contract RBF21, +1.37% was up 1%, or 1.3 cents, at $1.3658 a gallon in Thursday dealings.
If another U.S. fiscal stimulus package is passed by Congress soon, that may “help temporarily boost demand, but it comes at a time of year that Americans are limited” in their outdoor activities, De Haan told MarketWatch. So while fiscal stimulus would be helpful and could “push oil higher on the simple act of helping the economy, it is unlikely to boost demand” for gasoline.
“Many are under economic duress and wouldn’t necessarily hit the road to boost demand, but it may help down the road in spring and summer, if people are financially better off,” he added.
As for the vaccine rollout in the U.S., expectations are “very lofty, while gasoline demand growth has been anemic, if not depressing,” said De Haan. As long as there are “no let downs in the vaccine situation, expect typical season weakness” for gasoline prices until economies start recovering more strongly, he said. Then if “notable and sizeable countries start to walk back restrictions, closures and travel imitations, look not for seasonal weakness in gas prices, but strength.”
De Haan believes gasoline in 2021 could see prices rise between 25 cents and 50 cents a gallon “should everything go well with vaccines, but not it’s not likely until spring that we will see the start of a larger rally.”
This is “truly the most difficult time in my career to accurately forecast the direction of markets,” he said. “So much is contingent on improvement in the COVID situation and to what degree.”
