According to a latest update from the US Department of Energy’s Energy Information Administration (EIA), heading into the 2018 Memorial Day weekend, regular gasoline prices averaged $ 2.92 per gallon (gal) nationally on May 21, up from last year’s price of $ 2.40/gal before the holiday weekend. This year marks the highest price ahead of the Memorial Day weekend since 2014, when the national average price of regular gasoline was $ 3.67/gal. Relatively higher crude oil spot prices, strong gasoline demand, and falling gasoline inventories are all factors contributing to higher gasoline prices.
EIA forecasts that gasoline prices will be higher this summer compared with last summer primarily because EIA expects Brent crude oil prices to average $ 22 per barrel (b) higher than during last summer. US gasoline prices have been more closely tied to Brent crude oil prices than to West Texas Intermediate prices. The Brent price has increased significantly in 2018, averaging $ 78.17/b the week of May 18, 2018, which is a year-over-year $ 26.41/b (51%) increase from the same week in 2017. Because gasoline taxes and retail distribution costs have been generally stable, movements in gasoline and diesel prices have been mainly the result of changes in crude oil prices, wholesale margins, and inventories.
EIA expects US 2018 summer season (April through September) regular gasoline prices to average $ 2.90/gal, 49 cents higher than last summer. For all of 2018, EIA projects that U.S. regular gasoline prices will average $ 2.79/gal. The price of gasoline typically increases during spring because of the switch from winter-grade gasoline to the more expensive summer-grade gasoline. This year, the average price for regular gasoline has increased by 22 cents/gal (8%) since the start of summer driving season in April.
US gasoline consumption has remained relatively high, putting additional upward pressure on prices. As of May 11, 2018, the four-week average U.S. demand was 9.4 million barrels per day (b/d), approximately 64,000 b/d (1%) higher than the May 12, 2017 levels. AAA (in association with IHS Markit) expects more than 41.5 million Americans will travel this weekend, nearly 2 million more travelers than last year and the highest travel volume since 2005. Decreasing gasoline inventories, including finished gasoline and gasoline blending components, are also contributing to the recent increase in gasoline prices. While 2018 inventories have remained higher than the five-year average, they have remained lower than 2017 inventory levels for the past five weeks.