Gas At $4.89Enlarge Photo
Thinking of buying one of the most fuel-efficient cars like the Toyota Prius, the Honda Insight, or even the Ford Focus or Chevy Cobalt XFE this year, but waiting for even lower prices as dealerships become more desperate to move inventory?
That’s probably not going to happen. It’s true that right now many of the fuel-economy leaders are sitting on lots, just begging for a deal, but act fast! Sales of these models have been proven closely tied to the price of gas, which is suddenly quite steeply on the rise.
Factor in that this Memorial Day weekend, many more Americans are expected to hit the highway compared to last year, despite the rise in fuel prices—further spiking demand—and we might be seeing the national-average rise above $2.50 a gallon that many analysts are predicting we’ll hit later this summer.
If you’re one of those people heading out and want to keep your fuel budget to a minimum, follow our Fuel Saving Tips for the Holiday Weekend. Perhaps you'll keep some of them for your daily commute.
AAA, based on projections from IHS Global Insight, predicts that 32.4 million Americans will travel more than 50 miles from home over the weekend, compared to 31.9 million last year and 35.3 million in 2007. Nearly 83 percent of those weekend travelers will go by car, says AAA, with trips by air dropping slightly. Altogether Americans are expected to travel an average of 620 miles Memorial Day weekend alone and spend more than $1,000.
Wednesday, oil broke the symbolic $60-a-barrel mark, which prices have been below for many months—but still that’s way below the peak of more than $145 a barrel hit last summer.
According to the AAA, the average price of regular gas sits at $2.33 a gallon—a rise of 27 cents in the past month alone and two cents just in the past day. As recently as a week ago, AAA said in a release that gas prices wouldn’t rise above the $2.50 level this summer.
The New York Times says that there are a number of small factors—including economic optimism, supplies affected by violence in the Niger delta, and recent refinery fires in Texas and Pennsylvania—that altogether will cause a continued rise in the price of oil above levels previously predicted. Also, the commodities market has followed, albeit in a lagging way, the minor boom in stocks in recent weeks and that has played a role. OPEC is due to meet next week, and depending on what’s decided the trend could be softened or exaggerated. Up until this week OPEC has been making incremental cuts in supply; now that prices are spiking again, they might release more supply; but will it be enough?
As has been proven several times already this decade, shoppers have a very short memory, and buying attitudes shift rapidly with fuel prices, although several studies—including noteworthy ones conducted through the Institute of Transportation Studies at UC Davis—have shown that price volatility, not prices themselves, has more impact on consumers. With the extreme price swings of the past couple of years, it’s clear that shoppers have been more wary despite the cheap gas of the past six months or more.
Various energy experts in recent weeks haven’t bought into the idea that fuel prices will return to the same $4-plus level of last summer even if the economy bounces back. But there are strong indicators that the low, $2 prices that we’ve been spoiled with in recent months were just an aberration.
Those fuel-sippers might be sitting on lots now—just begging for a deal—but they might not be for much longer. Demand for them will return.