The Strategist

Cheap gasoline encouraged American drivers to travel more

08/26/2016 - 13:19

American drivers have travelled more miles that in the last summer travel season thanks to lower gasoline prices.

During the first half of 2016, American cars travelled a total of 1.58 trillion miles (2.54 trillion kilometers), according to the US Department of Transportation. This is 3.3% higher than the same period last year.

In addition, it is a record figure for the first half of the year for all time of such statistics. In the period from January to June 2015, US drivers drove 1.54 trillion miles, setting a record at that time. In June of this year, American drivers drove 282.3 billion miles; the figure increased in comparison with 2015.

Consistent growth of car mileage in the country is obliged to a number of factors, and the cheapest gasoline is likely to become the main one. The current situation could also be a reason of increased popularity of road transport among American travelers.

Travelling by plane became more expensive, painful and irritating for Americans, partially because constant delays of airline flights. Now, a timely flight cannot be guaranteed even when the weather is good and traffic is not overloaded.

The United States have established a record of travelled distance, yet, surprisingly, fuel consumption did not jump. The figure has been relatively small in recent years, compared to that of ten years ago.

Automakers have consistently improved rated fuel efficiency in virtually all new vehicles in response to steady rising fuel economy standards. 

According to the Energy Information Administration (EIA), US gasoline stocks were about 237 million barrels on June 10th. This is 8.8% higher than a year earlier. The index has peaked heights of mid-June 1991.

Status of reserves impacts value of the futures market in New York. Normally, a contract for delivery in July is worth more than an August contract. However, at the close of trading on Tuesday July 21, July futures for gasoline costed $ 1.5929 per gallon, about 1 cent less than August contract. This encourages to store gasoline, rather than sell it.

Gasoline inventories remain high. For the week ending June 10, demand for gasoline reached 9.762 million barrels per day, which corresponds to a previous peak reached in 2007.

Point of goods delivery of the New York Mercantile Exchange (NYMEX), located on the east coast of the United States, stored oil reserves of 69.7 million barrels, which was 10 million barrels more than that of last year.

"I cannot say that the demand is not strong, but it was not strong enough to reduce the actual level of reserves" on the East Coast, said Mark Anderle, Director of Supplies and Trade in TAC Energy.

Retail gasoline prices rose by about 16% compared with the beginning of the year, but still remain at a low level of $ 2.50 per gallon. Prices traditionally retreat after the end of May, in spite of increase in demand in June, July and August, the EIA reported.