The latest data from the U.S. Energy Information Administration showed that the average cost for Regular gasoline in America rose by 0.3 cents over the past week to $2.18 per gallon. Although only a fractional increase that was still the 10th weekly gain in a row and the highest reading since mid-March. Regionally, the cheapest gas in the country as of this writing can be found in Mississippi, where a gallon of Regular costs just $1.82 on average, while residents of California as usual have to pay the most in the continental U.S. for Regular ($3.10/gallon). The uptick at the pump was kickstarted by the sharp reversal in the price of crude oil following April’s period of extreme volatility. However, the main reason why gasoline prices have continued to climb is that the economic reopening has been going very well. Indeed, after extended lockdowns to stem the spread of the coronavirus, several countries and much of the U.S. started to lift such restrictions, in turn allowing more people back on the road and therefore enabling gasoline demand to start normalizing. In fact, mobility data from Apple Maps showed that most parts of the country by the first half of June had already returned to pre-pandemic levels of highway and road traffic.
In recent weeks, though, a clear loss of momentum has occurred due to the “second wave” of the coronavirus that has caused some states to slow or even reverse their economic reopenings. Although widespread lockdowns have not been reinstated, several activity restrictions have been put back in place, and the general uptick in uncertainty has caused many Americans to become more hesitant about venturing away from their homes. Some of the hardest hit states like Texas and Florida in terms of new positive tests have even dipped back below pre-pandemic levels of mobility once again. None of this means the broader economic recovery has been derailed but already enough of a loss in momentum has occurred that it could start to show up in other areas (data) in the coming weeks. The real test for the recovery will be how consumers respond after the second wave eventually subsides. Will consumption be quick to resume the V-shaped rebound that started in Q2 or will lingering concerns about additional outbreaks and rolling lockdowns provide a persistent drag on demand. For now the former remains more likely because many households are flush with cash for the first time in years thanks to the earlier relief provided by the CARES Act, and both Congress and the Federal Reserve have expressed a readiness to step in with additional support as needed.
Sources: U.S. EIA, GasBuddy, Apple Maps