Desperation to get out sets stage for gas comeback

Americans are getting ready to rekindle their love affair with the open road, unleashing a full-fledged recovery for gasoline that could send demand to a record.

Traffic is already roaring back in cities like Houston as offices reopen. Things will really start taking off this summer as pent-up travel demand finally busts out thanks to the increase in vaccinations. After almost half of Americans ended up canceling trips in 2020, many are planning to take an extra week of vacation this year to make up for lost time. Theme parks are gearing up for an influx of visitors, and attendance at national parks is expected to swell.

Demand is predicted to be so hot that Phillips 66 is set to reverse the flow of one of its pipelines starting May 1 so it can carry gasoline from Texas into Denver as more tourists head west.

Charles Ocasek, a 24-yearold, is one of them. In late May, he’s hitting the road for the first time since the pandemic started, driving his 2004 Nissan Pathfinder from the Chicago suburbs out to the Rocky Mountain resort town of Telluride, Colorado, for a meet-up with friends. He’s been living with his parents who are in their 60s, so the specter of getting and spreading Covid kept him from traveling until now. But by next month, he’ll be fully vaccinated, and he’s planning more trips for the summer.

“I’m tentatively planning on taking a month or a month-and-a-half and doing a multi-state road trip all over the country,” Ocasek said.

The surge in consumption means gasoline is likely going to be even more expensive than the U.S. government is forecasting.

The Energy Information Administration last week said average pump prices this summer will be more than 30% higher than last year at $2.78 a gallon. But many analysts are estimating prices will hit $3 a gallon for the first time since 2014.

Rising gasoline prices will be another marker of inflation that impacts Americans unevenly. Just like soaring food bills, more expensive fuel hits harder for lower-income families, with the costs making up a larger share of spending. That comes amid the unequal economic recovery, with the Black unemployment rate still trending high and lower labor-market participation among Americans without college educations.

Meanwhile, crude traders are widely anticipating a meaningful return of fuel demand in the world’s largest oil consuming country to help drive the next leg higher in prices.

A big part of oil’s rally so far this year has been on the supply side, with the OPEC+ alliance displaying strict output management and higher prices not yet drawing U.S. shale producers out in force. But crude has pulled back from multi-year highs in recent weeks, and will continue to face resistance until concerns over consumption start to fade.