U.S. gas prices are creeping higher this week, owing to an extended rally in global oil markets and a weaker dollar, but drivers are still set to pay some 15 cents less per gallon over the July Fourth holiday and the weekend that follows, adding more than $100 million in extra spending power to the consumer economy.
Global crude prices have risen more than 30% so far this year, taking U.S. crude close to $60 a barrel earlier this week, as OPEC members, as well as allies such as Russia, extend their pact to reduce output by 1.2 million barrels a day and demand holds steady despite slowing economic growth. Those moves have helped lift U.S. gas prices by nearly 24% since the Christmas holiday, even as domestic production surged to a record 12 million barrels per day.
That said, the average price of a gallon of gas across the United States is sitting at around $2.75, down some 15 cents per gallon from the last year, giving the 41..4 million drivers hitting the road this weekend an extra $135 million to spend over the holiday period. The average price per gallon was $2.65 on June 23, however, and only $2.22 at the beginning of the year.
"While gas prices this July 4 are nearly guaranteed to be slightly under last year's level, we will continue to close that gap as prices are likely to continue rising, especially as several states slapped those traveling for the holiday with higher gasoline taxes just hours ago," said Patrick DeHaan, head of petroleum analysis for GasBuddy. "The second half of the summer may end up being pricier than the first half, especially if the U.S. and China can get basically any trade deal in place and/or tensions continue to remain high between the U.S. and Iran. And not to forget hurricane season's peak in the second half, it may get ugly at the pump."
This year's discount at the pump, however, will be somewhat offset by higher gasoline taxes in five U.S. states -- Illinois, Ohio, California, Tennessee and South Carolina -- which kicked in earlier this week.
Crude prices, too, are set to push higher in the coming weeks, with investors citing a bigger-than-expected 5 million barrel decline in U.S. crude stockpiles, according to the American Petroleum Institute, and the ongoing impact of this week's OPEC+ agreement that will continue to take 1.2 million barrels from the market each day until the first quarter of next year.
Brent crude contracts for August delivery, the global benchmark, were seen 60 cents higher from their Tuesday close in New York and changing hands at $63.05 per barrel in early European trading. WTI contracts for the same month, which are more tightly linked to U.S. gas prices, were marked 52 cents higher at $56.77 per barrel.