New low oil prices will “drive” US holiday consumption and self-driving travel to record highs

The Zhitong Finance App learned that as gasoline prices fall to a low not seen since the pandemic, it is expected that during the December holiday period, the number of Americans choosing to travel by road will set a record.

The American Automobile Association said it is estimated that between December 20 and New Year's Day, about 109.5 million Americans will drive 50 miles (80 km) or more away from home, an increase of 2.2% over the same period last year. Around 8 million people are also expected to choose air travel during the same period, an increase of 2.3% over 2024.

But self-driving is definitely the first choice for travel this year, and it is estimated that about 89% of US holiday travelers will choose to drive. According to Association data, the cost of refueling per gallon of gasoline has fallen below the $3 mark, for the first time in more than four years. In some states such as Texas and Arkansas, oil prices are nearing the low of $2.50 per gallon. However, on the West Coast, oil prices often surpass $4.00 per gallon, driving up the national average.

Although oil prices usually fall in winter due to lower demand and a shift to cheaper winter blends, the accelerated drop in oil prices this time is due to the industry preparing for an oversupply, leading to a drop. Ongoing peace talks between Russia and Ukraine are also expected to remove a major risk premium from the market. The US benchmark crude oil futures fell about 18% this year.

Meanwhile, amid continued inflation and labor market concerns, American consumers have been more cautious about their personal finances. According to data from the American Automobile Association, domestic round-trip air ticket prices have risen 7% this year, and the average ticket price is close to 900 US dollars. Against this backdrop, the number of people traveling by car during the holidays is expected to still set a record.

However, gasoline prices are likely to drop further. Matt Smith, Kpler's chief oil analyst in the Americas, said, “As oil prices are suppressed and US refineries resume production from seasonal maintenance this month, it means that gasoline supply has increased, and prices may continue to drop slightly until January.”

Despite this, the popularity of electric vehicles and the increase in internal combustion engine efficiency mean that record driving mileage is no longer translated into a corresponding increase in gasoline demand. Americans' driving mileage hit a record high this summer, according to the Federal Reserve Bank of St. Louis. However, gasoline demand is still largely below the same period last year.