(Bloomberg) -- US average gasoline prices are set to fall below the $3-a-gallon level, just in time for Thanksgiving, when holiday travel is expected to climb back to pre-pandemic levels.
The national average retail fuel price already has fallen to the lowest since January, floating just a few cents above its 2021 level. Prices are on track to fall further as West Texas Intermediate crude clings near its lowest level since September.
From the Tuesday before Thanksgiving to the following Monday, motor club AAA expects 71.7 million people to travel by car for at least 50 miles. That’s 1.3 million more travelers than last year and the most since before the pandemic, when comparing the same seven-day travel window.
Despite a flood of drivers briefly rousing demand, AAA said national average gasoline prices could fall below $3 a gallon before the Thanksgiving travel window. Patrick DeHaan, head of petroleum analysis at fuel tracker GasBuddy, expects the same.
Last Thanksgiving, drivers paid a national average of $3.26 a gallon. In more than a dozen states east of the Rocky Mountains, drivers may pay as little as $2.25 to $2.50 this year, AAA said. At the end of last week, the national average was $3.08.
“Things at the pump are starting to feel normal for most Americans,” DeHaan said, crediting the year-over-year decline to a macroeconomic demand slowdown induced by the Federal Reserve’s interest rate hike campaign. “In some parts of the Deep South, where gasoline taxes are low, we’re seeing gas prices that would be more equivalent of the nostalgia everyone has for the good times.”
To be sure, seasonal demand for motor gasoline rebounded above year-ago levels last week, and nationwide inventories recently slid. Behind the scenes, US refiners are churning out record levels of gasoline to help offset a recent slump in imports. Still, the brief demand stimulus from Thanksgiving will hardly move the needle for pressured refiners.
“Refineries are struggling under weak crack spreads already, meaning that gasoline demand is anemic, and they’re having a hard time finding a home for all the gasoline they’re producing,” DeHaan said.
Unlike pump prices, road congestion won’t be immune to the deluge of travelers. Several cities, including Boston, New York, Los Angeles, Seattle and Washington, DC, will see more than double a standard day’s traffic, according to INRIX, a transportation data provider.
Other forms of travel are also spiking this Thanksgiving season. International flight bookings rose 23% since last year and cruise bookings are up 20%. Air travelers also are enjoying some fuel discounts. International flight prices have fallen 5% since last year, according to the AAA.
“Jet fuel prices have been a bit down in the dumps,” in part due to more efficient fleets, delayed aircraft deliveries and cooling summer travel demand, DeHaan said. “The component of the airfare that jet fuel makes up should be certainly a smaller piece of the pie.”
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