Pump prices for gasoline stopped just short of $3.00 a gallon ahead of the Memorial Day weekend, following early reports that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, would boost production. Speculation over how large an increase there would be combined with rising U.S. production saw pump prices fall by around 13 cents a gallon. That dip is probably over.
Crude oil prices rose nearly 5% on Friday following the announcement that OPEC would add about 600,000 barrels a day to its members’ production quotas. While that should be good news, the increase was about half the size many analysts and traders were looking for. As a result, crude prices shot higher.
The good news is that the OPEC increase brings with it a certainty that had been missing for the past few weeks. So even though crude prices rose sharply Friday, the outlook for the summer is for prices to fall further from their current level of around $2.90 a gallon.
Patrick DeHaan, head of petroleum analysis at GasBuddy, told MarketWatch that gas prices should drop to a range of $2.70 to $2.80 a gallon:
It keeps that psychological barrier of $3 a gallon from happening any time soon [in most of the U.S.]. But we’re still certainly higher than last year.
And that’s the not-so-good news. Last summer a gallon of regular gas cost about $2.30 a gallon, compared to today’s AAA-reported price of $2.86. Even if the price falls to $2.70, a gallon of gas will cost 15% more this summer than it did last summer.
Not only do higher gas prices tend to encourage travelers to take shorter trips, they typically spend less on other goods and services in order to stretch their dollars as far as they can. That hits restaurants, lodging and other tourism-related spending.
Along the West Coast and in Alaska, Hawaii, Idaho, Utah and Arizona, pump prices for regular gasoline are solidly above $3.00 a gallon, with California and Hawaii leading the country with a price of $3.74 a gallon.