Nearly 71 million Americans are anticipated to travel during the Independence Day holiday period, providing a potential boost for oil markets amid the crucial summer driving season.
According to the American Automobile Association (AAA), about 60.6 million Americans will drive 50 miles or more from home between June 29 and July 7, marking a 4.8% increase from last year. Additionally, 5.74 million are expected to fly, up 6.9%, and 4.62 million will travel by other means.
This surge in travel is a positive sign for crude traders, who are banking on tightened US oil markets driven by increased fuel demand. Stronger US oil consumption could help mitigate concerns about weak demand in other regions, notably China.
Despite slowing wage growth and dwindling pandemic savings, US travel growth remains robust. What was once considered “revenge spending” has now become the norm, AAA reports. Retail gasoline prices, currently below seasonal levels from the past two years, are also encouraging more road trips.
“People may be willing to cut back on goods, but they’re not cutting back on experiences,” said Aixa Diaz, a spokesperson for AAA.
Rebounding air travel has significantly boosted fuel demand, with jet fuel consumption reaching its highest levels since 2019. Over the Memorial Day weekend, air travel saw a 6% increase compared to 2023, according to JPMorgan Chase & Co. analysts citing Transportation Security Administration data.
However, gasoline demand is expected to be softer due to increased vehicle efficiency, despite Americans traveling more miles. Gas station spending remained flat year-over-year during the May holiday, as reported by RBC Capital Markets.
Patrick De Haan, head of petroleum analysis at GasBuddy, noted that while gasoline demand has been tepid this summer, there is still potential for a peak in late July. “We usually see demand peak for gasoline sometime in late July, so there’s still some opportunity,” he said. “But it does look like we are running a little bit lower than last year.”