Español
A father and two children lean out from different car windows, smiling.

Summer surprise: Lower gas prices

Wells Fargo Investment Institute’s John LaForge explains why the 2019 summer travel season has lower-than-expected gas prices.

July 24, 2019

Alison Troxell had budgeted carefully for her long-awaited weekend trip rafting on the Kennebec River in The Forks, Maine — including the cost of a tank of gas.

Alison Troxell pumps gas into a red car. The Cumberland Farms sign behind her lists gas at $2.67.
Alison Troxell got a pleasant surprise when it cost less than she expected to fill up her tank before a weekend trip.

So she was pleasantly surprised when the 300-mile round trip from Portland, Maine, in her new automobile wound up costing less than expected.

“I had not thought too much about the change in gas prices since last summer, but have been grateful that gas prices have stayed below $3 for most of the year,” Troxell said. “It seems like gas prices were maybe 20 cents higher last summer, so I may be saving about $4 a tank this summer. Based on my travel plans and driving, I could save around $40. That could mean an extra dinner out.”

“It seems like gas prices were maybe 20 cents higher last summer, so I may be saving about $4 a tank this summer. Based on my travel plans and driving, I could save around $40. That could mean an extra dinner out.”

— Alison Troxell

Troxell isn’t alone in her gas savings this summer. Strong global demand and limited supply drove prices higher during the 2018 summer travel season — averaging between $2.85 and $3.05 per gallon, according to AAA — but it’s a different story in 2019.

The average price per gallon nationally for regular unleaded gas was $2.79 this summer on July 17, for example — 7 cents cheaper per gallon than July 17, 2018.

John LaForge, head of real assets strategy for Wells Fargo Investment Institute and author of the report “When Gasoline Prices Matter,” said weakening global demand, growing oil supplies, and the U.S.’s lessening reliance on Middle East oil all factor into lower prices at the pump.

 

The image description section contains the complete alt text for this image.
“In the last few months, the price of oil has gone from high $60s to the low $50s a barrel — a 24% move down — and that usually translates down to lower gas prices.”

— John LaForge

“In the last few months,” said LaForge, “the price of oil has gone from high $60s to the low $50s a barrel — a 24% move down — and that usually translates down to lower gas prices.

“The world’s growth is slowing a little bit — GDP growth globally was 3.5% this time last year, and about 3% now — and when that happens it means countries need and buy less oil,” he said.

Troxell, who traded in a smaller, more fuel-efficient car for a more comfortable and safe automobile, said gas prices would have to increase significantly to alter her driving habits.

“I would not notice a big change unless gas went into the $3.50-a-gallon range,” she said. “Then I’d most likely limit any excess driving or question long-distance day trips that weren’t necessary.”

Since oil is a commodity, LaForge said, its price (and the price of gasoline, diesel, and other products made from oil) change often.

“Oil prices are pure supply and demand,” he said. “That’s why they often fluctuate and can be quite volatile. We still expect, on average, that drivers will see lower prices this summer than last year. Consumers should be pretty happy when they pull up to the pump.”

Traveling by car this summer? See AAA’s fuel-saving tips, gas calculator, fuel-price finder, and a list of the current gas prices across the U.S.


Risks
All investing involves risks including the possible loss of principal.  There is no assurance any investment strategy will be successful or will meet its investment objectives.

Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity. Products that invest in commodities may employ more complex strategies which may expose investors to additional risks.

General Disclosures
Wells Fargo Investment Institute, Inc. (WFII) is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

Opinions represent WFII’s opinion as of the date of this report and are for general information purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. WFII does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor.

This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon.

Topics:
outbrain