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Summer Driving Season Looks Affordable


On both sides of the border, Canada and the U.S. have kicked off the unofficial start of the summer driving season with the Victoria Day and Memorial Day long weekends. Compared to last year, 2017 looks to be different, unlike the past few years when a combination of refinery upsets, higher demand and even the big fire in Fort McMurray affected gasoline production.

Even though U.S. pump prices are on average about 8 cents a gallon more expensive than last year and up 6 cents a liter in Canada, according to our GasBuddy benchmark, the numbers may not tell the whole story.

While a growing economy, three consecutive years of rising demand and relatively cheap pump prices are thought to be a given, weaker demand than expected may set the stage for cheaper prices across North America. For example, gasoline prices this Memorial Day weekend are poised to be their lowest since 2005 for motorists in these states: Michigan, Indiana, Ohio, Kentucky, Illinois, while motorists in Georgia, Tennessee, North Carolina and South Carolina are on the cusp of the same feat.

U.S. refineries churning out petroleum products at a robust 93-94% of capacity, there’s little doubt, cheaper oil and decent margins for gasoline and diesel lie at the heart of impressive utilization rates. However, production requires buyers and, according to the U.S. Energy Information Administration (EIA), fuel consumption for this time of year is down 2.1%, ending three consecutive years of record-breaking gains. Compared to last year when gasoline demand hit 9.33 million barrels a day, the number is expected to be no better than 9.1 mb/d. However, even if demand is down, so far, vehicle miles traveled continue to rise, a sure sign that vehicle fuel efficiency is increasing.

Though the drop-off in demand can also be linked to poor weather these past few months on the Pacific coast and in places like British Columbia and Texas, few expect consumption to register a fourth record breaking year, even with a strengthening economy and lower unemployment.

Other variables and unknowns stem from the political environment throughout the continent. In Canada, carbon taxes, other provincial taxes and a weaker currency continue to prop up pump prices, forcing many to be more cautious in their purchases. The threat of a border tax, change in immigration policy, renegotiation of the North American Free Trade Agreement also play a part in uncertainty and a more cautious approach by consumers. Little wonder that gasoline inventories are approximately 6 % higher than the five-year average for this time of year. Barring a sudden, dramatic and unforeseen increase in demand for gasoline, swollen stockpiles are likely to lead to a few more smiles at the pumps this summer.

Let the affordable summer driving season begin.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.