Memorial Day, which signals the start of the summer driving season, is upon us and cash-strapped consumers have an eye on pump prices as they navigate through a tough economic climate.
Fortunately, for their relief, gas prices are trading off the levels seen a year ago.
What Happened: The nationwide average price of regular gasoline was $3.578 a gallon, according to data provided by the American Automobile Association. This, however, marked an increase from the week-ago average of $3.539.
A year ago, prices topped $4.600, when higher inflation and the Ukraine-Russia war sent gas prices skyrocketing.
Despite the easing from a year ago, gas prices are still above the levels seen before 2022.
In line with the typical trend, prices were the highest in the states on the West Coast. Consumers in the Southeastern region enjoyed the cheapest prices.
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Demand during the long weekend is expected to increase. AAA forecasts that Memorial Day trips are set to increase 6% year-over-year in 2023. It expects more than 37 million Americans to drive to their destination.
AAA sees the slight week-over-week uptick in gas prices to be mitigated by the low cost of crude oil. A barrel of WTI-grade crude oil ended Friday’s session at $72.67.
“Pump prices could stabilize or fall once this long weekend is in the rearview mirror,” said Andrew Gross, a spokesperson for AAA.
Why It’s Important: Any gas price inflation could act as a setback as the economy grapples with multiple headwinds. The Federal Reserve has shown no signs of pivoting even after raising the Fed funds rates to a 16-year high of 5-5.25%.
The central bank is held back by inflation that is stubbornly holding above its target.
The banking crisis has added another element of risk to the economy. Predictions are for the economy to at least dip its toe into a mild recession. On a positive note, sanity prevailed as after prolonged deliberations the White House and House Republicans agreed on a budget deal. If the bill is ratified by Congress and signed into law by President Joe Biden, we may have averted a precipitous economic collapse.
Against this backdrop, higher gas prices may prove unhealthy for consumer spending, which fuels the bulk of economic activity.
All eyes would be on gas prices in the near term to see if there is any pain in the pump that can slow down growth further.
The United States Gasoline Fund, LP UGA ended Friday’s session 1.46% higher at $61.35 a barrel, according to Benzinga Pro data.
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Image and article originally from www.benzinga.com. Read the original article here.