Gas Prices Expected to Fall by Memorial Day Holiday

Motorists can expect current gasoline prices to move lower by Memorial Day weekend compared to their levels last year, even though prices have moved slightly up before the summer driving season officially began. The simple reason for this is that supplies are high and demand is low. According to Editor Stephen Schork of the Schork Report, the downward movement of gasoline prices may reflect the cheapest summer for drivers since the recession ended.

The latest rise is typical and seasonal, in expectation of higher demand with the approach of the holiday weekend, according to market analysts. Further, prices usually strengthen as the peak driving season comes.

However, the fundamentals indicate generally stable rates in the future. The Department of Energy recently said that the supplies of gasoline in the East Coast grew by almost 3 percent from last week, to 63.3 million barrels, and were higher by almost 18 percent compared to the same time in the past year. Schork attributes this to strong refinery production.

Gasoline demand is seasonally higher from midwinter as hot weather makes the frequency of optional driving higher. But, in the mid-parts of May, gasoline consumption was at its lowest rate since 2000.

There is a change in behavior reflected in these numbers: people are not driving as much as they used to. A reason for that is the change to more fuel-saving cars, leading to lower gas consumption. Another would be the slow growth of the economy.

According to the Energy Department, gasoline purchased last week was 6.5 percent lower compared to the past year. The Department has projected an average gasoline price that is lower by 1.8 percent for the upcoming summer compared to the last, to around $3.63 per gallon.