Drivers hitting the road this Easter weekend will find a reason to smile at the pump. Gasoline prices are at their lowest point for the holiday weekend since 2004, clocking in at just above $2 a gallon on average.
Cheaper fuel savings have so far put an extra $9 billion in Americans’ wallets since New Year’s Day, compared to the same three-month period in 2015, said Tamra Johnson, a spokeswoman for motor club AAA. That’s roughly $45 in savings per driver, even as Americans guzzle more gasoline and drive extra miles this spring.
Gasoline prices on Good Friday averaged $2.03 a gallon, about 16 percent lower than the $2.42 a gallon average this time last year and down from nearly $4 a gallon two years ago, AAA estimated.
“The lower gas prices we’ve seen have given people more money in their pockets,” Johnson said. “That’s definitely prompted more people to get out on the road and drive this weekend.”
Fuel prices have plunged in the last two years as crude oil tumbled from a peak of $105 a barrel in June 2014 to below $27 a barrel in January 2016. A surge in global crude supplies — spurred by the U.S. fracking boom — has fueled fears of a worldwide glut, particularly as demand growth softens in China and other emerging markets.
The collapse in oil prices has slammed U.S. and global energy companies, forcing firms to cancel around $100 billion in investments and lay off tens of thousands of workers. Countries that depend on oil revenues to fund their budgets are facing fiscal chaos, particularly in Venezuela. Hyperinflation, negative growth and food shortages have rendered the South American nation the world’s worst-performing economy.
For U.S. drivers, however, the oil price downturn has largely been positive. Drivers saved an estimated $115 billion on gasoline throughout 2015 compared to the previous year, according to AAA.
Americans are spending a large chunk of those savings on restaurants and vacations, giving a lift to the hospitality and tourism sectors, said Tom Kloza, global head of energy analysis for the Oil Price Information Service.
“That probably accounts for 50 percent of the savings, beyond a little additional driving,” he said. “There’s a mystery where the other 50 percent go, though. Maybe it’s going to savings, maybe it’s going to pay off debt.”
Falling fuel costs have also prompted Americans to buy more gas-guzzling sport utility vehicles and heavy pickup trucks, so that they’re not only driving more, but using more fuel as they commute. The U.S. is on track to break the nation’s annual record for gasoline consumption: 390 million gallons a day on average in 2007, Kloza said.
“I don’t think that’s necessarily something we should be proud of,” he added, noting the rise in carbon dioxide emissions and toxic air pollutants that would come with burning more gasoline and diesel. “That’s a dark cloud in the silver lining.”
The 12-year low in gasoline prices this Easter weekend also isn’t expected to last for long.
Gasoline prices are already up 31 cents from last week and are set to keep climbing through the summer. As Americans drive more miles, the higher fuel demand is putting pressure on supplies. Refinery operators right now have temporarily shelved some production as they make seasonal repairs. When they do come back online ahead of the summer driving season, the fuel itself will be more expensive, as refineries are required to produce less-polluting summer blends during hotter months.
Crude prices are also recovering slightly to roughly $40 a barrel. Oil output from the U.S. and other nations is on track to slide this year as drillers postpone projects and slash exploration budgets. Talks of a potential production freeze from Saudi Arabia and other major oil producers has also raised hopes of a shrinking global supply glut.
“Gas prices are slowly ticking up, make no mistake,” AAA’s Johnson said.
Even so, energy analysts said they don’t expect 2016 gasoline prices to rise above last year’s levels. Gasoline prices averaged $2.47 a gallon last Memorial Day weekend and averaged $2.69 a gallon throughout the summer, from May 25 to Sept. 7, 2015, AAA data show.
Kloza said gasoline prices could average about $2.15 nationally after picking up in the second quarter and early third quarter. “This is going to be a very cheap year,” he said.