A record number of Americans planning one last summer road trip this weekend will shell out the highest Labor Day gasoline prices ever seen, and there is little relief in sight, experts said on Tuesday.
A shortage of domestic refineries and ever-growing demand in the United States is likely to turn this summers sticker-shock at the pumps into a routine of higher fuel costs for years to come, analysts said.
"We are going to see higher (summertime) gasoline prices for the foreseeable future," said Doug MacIntyre, analyst for the U.S. Energy Information Administration. "Not as high as they are now, but higher than our pre-2004 experience."
About 28.7 million of the 34.1 million Americans expected to travel at least 50 miles from home this weekend will be driving, according to a AAA survey. That is a 2 percent increase from last year. Both figures, for driving and overall traveling forecast, would be records, the AAA said. Those drivers are expected to see average retail gasoline prices near the current $1.86 a gallon, as much as 15 cents higher than last years Labor Day record, and not far from the all-time high of $2.05 hit in May, the AAA said.
"The current high gas prices wont keep people off the highways this holiday," said AAA travel vice president Sandra Hughes. "American vacationers have taken to the roads in droves this summer, despite gas prices that hit new records at Memorial Day and have run at historic highs all summer long."
The AAA is the largest motorists group in the United States.
Short-term gain, long-term pain
In the near-term, September will likely show average U.S. gasoline prices falling to $1.80 a gallon or less, from the current $1.86, said the EIAs MacIntyre.
This is normal. Once Labor Day passes, driving demand diminishes and gasoline prices fall, MacIntyre said.
Last year, after Labor Day, prices dropped 15.5 cents by the end of September, but this years drop is not expected to be as big, said MacIntyre.
Geoff Sundstrom of the AAA said the days of $1.50 gasoline prices in the summer are likely not to be seen in the next few years.
"The AAA doesn't see U.S. retail gasoline prices moving down to $1.50 a gallon or closer to the historical averages because we still have a growing economy, growing energy use, limited gasoline inventory in the United States, and limited crude oil production worldwide," said Sundstrom.
The EIA said that gasoline demand is expected to continue to rise about 100,000 barrels per day annually, far outpacing increases in domestic production.
This will mean a growing reliance on imports and a higher likelihood of price spikes, said Dan Gilligan, president of the Petroleum Marketers Association of America.
The PMAAs 8,000 members sell about 55 percent of the gasoline sold in the United States.
One of the PMAAs main goals is to pressure Congress to pass laws that would increase U.S. production of gasoline and the possibility of higher prices may be a catalyst for change.
"In the past, Congress gets focused on what we are going to do about gasoline prices and then prices fall and they lose interest. This will not happen again" he said, because gasoline prices, especially in the summer, are going to remain higher than they've been before this year.
The PMAA is not in favor of tightening gasoline mileage requirements but favors tax incentives to consumers who buy high-mileage cars such as hybrids, which run on both electricity and gasoline.
A good note for U.S. drivers is that even though U.S. oil prices came within 60 cents of $50 a barrel earlier this month due to turmoil in the Middle East and worries over growing global demand, the record crude price hit August 20, gasoline prices are still expected to fall in the short run. U.S. crude futures ended Tuesdays trading at $42.12.
"We may never see the effect of the run-up near $50 reflected in the gasoline prices considering the time it happened," said MacIntyre. "It takes two to four weeks for crude prices to be reflected at the pumps. By the time you see any impact in the (near-$50) oil price, we will be after Labor Day when demand just drops off."
