Softening gas prices expected to boost travelers' spirits

Kansas City StarMay 27, 2011 

KANSAS CITY, Mo. — If you've been worrying yourself silly about $4 gasoline, it may be time to relax.

Lower oil prices are finally trickling down to retail fuel pumps, prompting experts to wonder whether gas prices have peaked for the year.

The fading fears of $4 gas also come just in time for the traditional Memorial Day vacation kickoff.

Travel industry officials said consumers were already showing signs they wanted to travel as much if not more than a year ago. But that was in part because they planned to offset their fuel costs by eating cheaper meals and finding less costly hotel rooms.

Now, travel industry officials said, the dropping gasoline prices will at least provide a psychological boost.

A couple of weeks ago, the national average price for gasoline stood at $3.99 a gallon. By Thursday it had dropped to $3.81.

Gas prices are still about $1.15 higher compared to last year. So some consumers are still weighing vacation tradeoffs.

Norma Olmedo, a student at Kansas City-area technical school Pinnacle Career Institute, said her family is delaying their annual road trip to California until the end of summer so they have more time to save for gas money.

"It's a two-day drive, and we'll probably take my car," the 20-year-old said. "When gas was right, we rented a huge family van, like a party van, that was more comfortable ... but we're not taking that to save money."

The average price for gas in April was the highest in more than two decades and the momentum pushing prices higher continued into May. The federal Energy Information Administration and other analysts had been predicting the national average for gasoline to top $4 at some point this summer.

But now the federal agency is reconsidering.

"It is possible we have reached our peak," said Neil Gamson, an analyst for EIA.

That could change again if an event such as a hurricane disrupts gasoline production or there's more Middle East unrest. Refinery profits are still high, which is helping keep prices so far from falling more.

But Lehi German, publisher of Fundamental Petroleum Trends, said gas prices could go lower with growing imports and refinery production increasing supplies. Nevertheless, he added, gas prices are expected to remain higher this summer than last.

This summer, higher oil prices have pushed airfares up 14 percent and gas prices by more than a third compared to a year ago. Many in the travel industry have been worried for months about how the high prices would affect consumers. They especially remembered how record fuel prices in 2008 roiled travel plans.

But there are gathering signs that summer travel will be at least as good or even slightly better than last year even with higher prices and fares.

A fresh AAA report says higher prices have apparently not convinced plenty of Americans to stay close to home over the Memorial Day weekend.

AAA officials had thought the more expensive airfares and fuel had set the stage for a drop in leisure travel. But in its annual survey of Memorial Day travel, an early sign of where the summer vacation season is headed, they found those higher costs weren't having much impact.

About 30.9 million people are expected to take a road trip by motor vehicle over the holiday weekend. That's basically the same as a year ago.

Another 2.6 million are planning to travel by air, a 12 percent increase. They'll also be traveling farther with the average trip 792 miles, a 27 percent jump from a year ago.

"It looks like we're going to have a decent travel season," said Mike Right, a spokesman for AAA.

Right questions whether a 12 percent increase in air travel is sustainable, but it adds fodder to the idea that the summer travel season, boosted by the fall of fuel prices from their peak, won't be a washout.

Airlines were worried that higher airfares would scare off passengers, but the Air Transport Association, a trade group, says it expects passenger traffic to be up 1.5 percent. Southwest Airlines on Thursday said summer reservations are on par or slightly higher compared to a year ago. Delta Air Lines expects 45 million passengers this summer, about equal to last year.

Challenger, Gray & Christmas Inc., a human resources consulting firm, said Tuesday that workers are feeling more confident about taking paid time off with improving job security.

Businesses depending on those traveling by motor vehicles are hopeful, too.

Worlds of Fun, a Kansas City amusement park that draws customers from five states, said out-of-towns visitors plummeted in 2008 in the face of high gas prices. But this year it's selling more tickets to those customers and seeing strong reservations for overnight cottages and RV camping spots.

The QuikTrip convenience store chain doesn't predict future business, but the chain said it was ready to bring in additional gasoline to meet increased demand.

"We hope it explodes like crazy and people are tired of being cooped up," said Mike Thornbrugh, a spokesman for QuikTrip.

The higher gas prices this summer compared to last have raised the monthly cost of gas for an average household by $100. But the impact of those prices on one trip may be less than you think. For an average vacation, including lodging and restaurant meals, fuel costs account for about 15 percent.

For example, a trip from Kansas City to Chicago and back takes 42 gallons of gas in a vehicle that gets 25 miles a gallon. That costs $50 more than a year ago, or less than a night in a hotel room.

But that's real money, especially in a tight budget. According to AAA, travelers are more than offsetting higher fuel costs by going to less pricey attractions, eating cheaper meals and staying in less expensive hotels.

The result: Median spending during the Memorial Day Weekend is expected be $692, a 14 percent decline from a year ago, when it was $809.

"They're wanting to travel but they're looking to economize, said Right of AAA.

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