Memorial Day weekend gas prices are the worst in 7 years — for these reasons
Millions of Americans hitting the road for the Memorial Day weekend are in for a shock when they fill their gas tanks. Average pump prices for the holiday are the highest since 2014, according to auto club AAA.
Travel demand is on the rise as more people are fully vaccinated. That, along with traditional seasonal factors, has boosted the typical U.S. gas price to around $3.04 a gallon, way up from a little under $2 last year at this time.
Here's a closer look at the reasons the cost of gas has been going up, plus some tips on ways to save money to help pay for your costlier fill-ups.
1. The COVID vaccine effectKaren Dole / Shutterstock
As more Americans get their shots and life begins to return to something closer to normal, people are likely to drive and fly more. And that activity will contribute to rising fuel costs.
AAA expects 37 million Americans to travel for Memorial Day, mostly by car and plane. That’s a 60% increase over last year’s holiday weekend and a sign that summer travel will be robust.
“With the increase in travel demand, gas prices are going to be expensive no matter where you fill up, so plan ahead,” says Jeanette McGee, a AAA spokeswoman, in a news release.
You might want to consider replacing your vehicle with a more fuel-efficient model. If you got money back from the IRS this year, you could turn your tax refund into a new set of wheels.
2. Summer gas blends cost moreStokkete / Shutterstock
During warmer months, gasoline has a greater chance of evaporating from your car’s fuel system, producing more smog. So the government requires Americans to use cleaner-burning fuel in summer to help lower emissions, says GasBuddy, a fuel-price tracking website.
Refiners produce gasoline blends meant to reduce evaporation, and that's a more expensive process. Those blends can cost up to 15 cents more per gallon, according to the service station trade group NACS.
A good way to fight higher gas costs is by shopping around for lower prices, because what you pay can vary by up to $1 a gallon within the typical metro area, GasBuddy says.
Using a variety of tactics to save on the cost of driving will be a smart strategy this summer — but, then again, it's always a wise practice. For example, regular comparison shopping for car insurance can save you as much as $1,100 a year, various studies have found.
3. Crude oil prices have been going upRachenStocker / Shutterstock
As with gasoline, the cost of crude oil tanked in 2020 while COVID-19 was wrecking economies and stopping people from traveling. To prop up oil prices, the OPEC cartel and its allies slashed oil production.
OPEC has been slow to boost output again, and crude prices have responded by surging higher. After a year of soft prices, West Texas Intermediate crude has been trading in the mid-$60 a barrel range, and Goldman Sachs expects Brent crude prices to hit $75 by the end of June. It topped $69 on Friday.
OPEC and the allies announced on April 1 that they'd gradually raise production, which could help stabilize prices.
Though gas prices are going up, mortgage rates remain historically low — meaning if you're a homeowner, one way to offset the cost of fuel is by refinancing your home loan. Mortgage data and technology provider Black Knight said this week that 14.1 million homeowners could save an average $287 a month by refinancing.
4. Refineries have been plagued by problemsPaul W Thompson / Shutterstock
It's been one thing after another for the refineries that turn crude into gasoline. Weeks ago, a cyberattack temporarily shut down the Colonial Pipeline in the eastern U.S. and led to refinery shutdowns, gas shortages and lineups at the pumps for days.
Last year, plummeting fuel sales triggered by COVID had the oil and gas industry reeling. By late 2020 there were more than a dozen refinery closures that reduced U.S. production by more than 1 billion barrels per day.
"It's possible some capacity could come back online in the 2022-2023 timeframe, but by and large, we think these closure announcements will mostly prove permanent," Raymond James analyst Justin Jenkins said about the refinery shutdowns in a December report.
U.S. oil and gas producers lost tens of thousands of jobs last year, forcing laid-off workers to lean on their credit cards more than usual. If that's what you've been doing, a lower-interest debt consolidation loan can cut the amount you pay in interest charges each month — and help you afford the higher prices at the pump.
5. Stimulus checks have pumped up spendingWilliam Sawalich / Shutterstock
Since President Joe Biden signed his $1.9 trillion COVID relief package two months ago, Americans have been receiving a third round of stimulus checks for up to $1,400 each. The aid has helped lift gas prices by prompting consumers to get out and shop.
Goldman Sachs estimated that $2 trillion in economic stimulus spending over 2021 and 2022 could pump up U.S. oil demand by roughly 200,000 barrels a day. If supplies don't keep up, that higher demand will mean even higher fuel prices.
With gasoline already more expensive, another way to balance out those costs is by spending less on other purchases.
You might download a free browser add-on that will point you in the direction of lower prices and other savings every time you shop online.