Memorial Day weekend, the typical start of the summer driving season in the United States, will offer some clues about gasoline demand and driving behavior after lockdowns were eased across America.
U.S. gasoline demand – which averaged 9.28 million barrels per day (bpd) or nearly 10 percent of daily global oil demand in 2019 – during the Memorial Day holiday weekend will serve as a gauge for the travel behavior after the great COVID-19 lockdown was eased with all 50 states re-opening at least to some extent. U.S. gasoline demand has recovered from the lows seen at the end of March and early April. However, it is still around 30 percent below ‘normal’ levels, especially for this time of the year at the unofficial start of the summer driving season. The oil market and analysts will be watching if the initial pent-up demand in the first two weeks of May after easing of the lockdowns can be sustained and improved over the summer.
This Memorial Day start to the driving season will be like no other. It’s unclear how many Americans will hit the roads this weekend, and no one dares make projections. Heading into the holiday weekend, average U.S. gasoline prices are the lowest in 17 years. Still, it is unclear how many Americans will travel after lockdowns were eased, and after an estimated 38.6 million people have lost their jobs since the end of March. Over the past reporting week to May 16 alone, more than 2.4 million people filed unemployment insurance claims, the U.S. Department of Labor said on Thursday.
So great is the uncertainty over how many Americans will travel at the start of the driving season that even AAA did not issue a Memorial Day weekend travel forecast for the first time in 20 years, because “the accuracy of the economic data used to create the forecast has been undermined by COVID-19.”
“Last year, 43 million Americans traveled for Memorial Day Weekend – the second-highest travel volume on record since AAA began tracking holiday travel volumes in 2000,” said Paula Twidale, senior vice president, AAA Travel. “With social distancing guidelines still in practice, this holiday weekend’s travel volume is likely to set a record low.”
So far, the lowest Memorial Day weekend travel figures were recorded in 2009, toward the end of the Great Recession, at 31 million travelers, 26.4 million of whom traveled by car.
This weekend may hit a record low, but travelers have started to book holidays for later in the summer.
“AAA.com/travel online bookings have been rising, though modestly, since mid-April, suggesting travelers’ confidence is slowly improving. When it is safe to travel, AAA predicts vacationers will have a preference for U.S destinations, mostly local and regional locations, and the great American road trip,” AAA said.
What could be the record low travel numbers for Memorial Day weekend would come at gasoline prices for that period of the year at their lowest since 2003.
“However, as the country continues to practice social distancing, this year’s unofficial kick-off to summer is not going to drive the typical millions of Americans to travel,” AAA spokesperson Jeanette Casselano said at the beginning of this week.
“Millions of Americans are struggling with job losses and while gas prices have rebounded slightly, the low-priced start to the summer may offer some respite from the dire economic conditions many are stuck in,” Patrick De Haan, head of petroleum analysis at GasBuddy, said this week.
“With Americans reluctant to get on a plane or train for the holiday weekend, which is likely to continue throughout the summer, gas prices may slowly continue to rise, but prices will remain at a steep discount to last year to account for the situation: gasoline demand hasn’t been this low to start summer in decades, and gas prices reflect that situation,” De Haan said.
Gasoline demand surged from very low levels when many U.S. states re-opened at the beginning of May, but after a week or two, the gas demand trend flatlined, according to analysts.
“There’s improvement but over the past 10 days, 15 days, we’ve really flatlined. It’s really societal behavior, not state level policies that are driving gasoline demand,” Michael Tran, global energy analyst at RBC, told CNBC’s Patti Domm.
EIA data shows that gasoline demand for the week to May 15 was 6.79 million bpd, up from two weeks prior but lower than the 7.398 million bpd demand for the previous week to May 8.
Social distancing and travel behavior and the state of the U.S. economy, including the unemployment rate, will shape the trajectory of gasoline demand recovery in America. Memorial Day weekend could offer early insights into the travel and driving patterns in a post-coronavirus world.