Record Travel Expected for Fourth of July Holiday Despite High Fuel Costs and Hurricane Threat
Americans are gearing up for a summer filled with road trips and vacations, despite soaring fuel prices and the looming threat of Hurricane Beryl. Motorist group AAA predicts that nearly 71 million people will travel during the Independence Day holiday, a figure that rivals pre-pandemic travel numbers. Out of these travelers, approximately 60 million will hit the roads, while nearly 6 million will choose to fly to their destinations. Additionally, around 4.6 million people are expected to opt for buses, trains, or cruises.
AAA spokesperson Andrew Gross expressed astonishment at the anticipated record-breaking numbers, comparing this year’s travel statistics to what 2020 would have been like without the pandemic. This surge in travel is not only exciting for vacationers but also significant for central bank officials and policymakers. In an election year, summer travel can serve as a crucial measure of consumer sentiment. As consumer spending rises while inflation remains unchanged, experts are hopeful that the U.S. Federal Reserve can effectively manage inflation without triggering a recession.
Fuel costs, though still high, have slightly eased over the past few months. The national average price for a gallon of gasoline currently stands at $3.50, which is three cents lower than last year. Domestic airfare has also seen a 2% decrease compared to last year, with the average domestic round trip costing around $800.
However, despite these improvements, fuel prices remain historically high. Data from the U.S. Energy Information Administration reveals that during the July Fourth week in 2019, the average price for a gallon of gasoline was $2.74. Furthermore, the weekly average price between 2015 and 2019 was under $2.50 per gallon. Despite this upward trend in fuel costs, American Trucks’ survey of over 1,000 people suggests that travelers are undeterred and are proceeding with their travel plans.
According to EIA data, the four-week average demand for gasoline reached a one-year high of 9.2 million barrels per day (bpd) recently, indicating that retailers are stockpiling ahead of the holiday. Additionally, jet fuel demand has also reached a seven-month high of 1.7 million bpd. John LaForge, head of real asset strategy at Wells Fargo Investment Institute, suggests that it is not necessarily the price itself but rather the rate of change in fuel prices that impacts consumer sentiment. Since gasoline prices have not experienced dramatic fluctuations in the past six months, the consumer psyche remains largely unaffected.
While Hurricane Beryl poses a potential threat, it is unlikely to significantly impact U.S. vacation travel. The hurricane has already caused devastation in some Caribbean Islands but is expected to weaken considerably by the time it reaches Mexico’s Yucatan Peninsula on Thursday night. Furthermore, U.S. fuel inventories are better stocked than in previous years, providing motorists with a buffer against sudden price shocks if the hurricane disrupts refining operations.
EIA data reveals that U.S. gasoline stockpiles currently sit at around 231.7 million barrels, which is 5.6% higher than last year. Jet fuel stocks have also increased by 4.7% compared to last year. GasBuddy analyst Patrick De Haan concludes that Americans are optimistic and eager to travel, further reinforcing the notion that people are undeterred by high fuel prices and external challenges like hurricanes. The summer of 2024 is shaping up to be a season of wanderlust and exploration, providing a much-needed boost for the travel industry and the economy as a whole.