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This summer, US motorists may be hit with more gasoline price shocks

The ongoing war with Iran is causing supply disruptions that are driving up gasoline prices. This will add to the financial strain for drivers as they hit the road to travel for Memorial Day weekend.

Retail gasoline prices in the United States have increased by more than $1.50 a gallon or 45% since the United States and Israel attacked Iran late in February. The price of crude oil, which is used to make gasoline, has also risen, along with the prices of many other goods. This is because the conflict led to an effective closure of Strait of Hormuz - a major trade route through which approximately 20% of world oil consumption passes. As households struggle with rising energy costs, President Donald Trump faces increasing political pressure. Many?states have already suspended gas taxes in order to reduce the cost of fuel. Discussions about lowering the federal 18.4 cent gasoline tax are also underway.

Memorial Day Weekend, a three day?weekend, is when many Americans will start their summer travels. According to AAA data, even with the higher prices of gas, 39.1 millions people will travel by car and 3.66 by plane.

Patrick De Haan is GasBuddy's head of petroleum analyses. He said that this is the most volatile gas price summer in recent years. The Strait of Hormuz closing is at the heart of it. Americans will pay billions of dollars more to travel to their destinations, even after the Strait is reopened. He said that it could take a year or longer for prices to recover.

TRAVEL RESCUES HIGHER FEES AND SHORTER TIMES

Even so, Americans are still planning to drive less this summer due to the high cost of fuel.

GasBuddy's latest survey shows that only 56% of Americans plan to drive for more than 2 hours this summer compared to 69% the year before. The survey shows that cost is the most important factor in travel decisions. 67% of respondents said gas prices directly affect their driving plans, and 36% say rising costs cause them to take less road trips.

Analysts warned that a shortage of gasoline could be imminent as summer travel season approaches. Bob Yawger is the director of energy futures for Mizuho. He said, "Gasoline Storage has been falling for 14 weeks in a line, every week since the war in Iran. We are now going to stagger through Memorial Day Weekend, the beginning of summer driving season. This will be within striking distance of the 11-year record low." He said, "We're in big trouble when it comes to gasoline." The Energy Information Administration reported on Wednesday that U.S. gasoline stocks fell by 1.5m barrels to 214.2m barrels in the past week, as opposed to analysts' expectations of a 2.1m barrel draw.

Fuel costs will continue to rise due to the uncertainty in the Middle East and the recent refinery problems, as well as the upcoming Atlantic hurricane season, tight global inventories, and the recent refinery failures. GasBuddy's?forecast showed that the national average gasoline price is expected to be $1.48 higher on Memorial Day this year compared to the previous year. If traffic in the Strait of Hormuz remains restricted throughout the summer, the prices could reach $5 per gallon. John Kilduff of Again Capital said, "We must be concerned about the fact that we are drawing down inventories globally at an incredible pace. Global demand is also finding its way to us, not only for crude oil, but also for refined products."

(source: Reuters)