Rising gas prices may not affect summer travel

As the warm weather creeps in and the school bells ring one last time, the summer season finds itself upon us. According to AAA forecasts, nearly 43 million Americans will kick off the season with a Memorial Day vacation — despite the rise in gas prices.

Nationally, gas prices continue to rise, nearing close to $3 per gallon, yet many Americans will still drive to reach their vacation destinations. With supply and demand in mind, Elizabeth Moorehouse, an associate professor of economics at Lycoming College, looked at the rise in prices and analyzed its effect on summer travel from an economists standpoint.

“The recent increase in gas prices is most likely due to supply side factors,” said Moorehouse. “President Trump’s decision to withdraw from the Iranian nuclear deal are expected to reduce the country’s oil exports.”

Moorehouse added that the ongoing economic crisis in Venezuela, another country that acts as a major oil exporter, had also contributed to reduced exports. Both events reduce the supply of oil available, and therefore, increase the price of oil and again the price of gas. Oil is a major resource needed to produce gasoline, as it decreases there is also a decrease in gas produced.

“Demand side factors might also be playing a role in the rising gas prices,” added Moorehouse. “The demand for gas is likely increasing as we are approaching summer and people are traveling and driving more.”

However, while the demand for gas could increase, according to Moorehouse, it could not have an effect on the amount purchased by consumers.

“Economists are also interested in how consumers respond to an increase in the price of a good or service,” said Moorehouse. “The law of demand predicts that, all else equal, an increase in the price of a good or service will lower the amount that consumers buy.”

While the law of demand applies to gasoline, according to Moorehouse, it is a pretty weak relationship over a short period of time. The rise in prices could cause the amount of gas purchased to fall, but not by much as it is still a needed source especially for travel to work in the summer.

A factor that plays into the weak relationship could be the strong labor market. With the rise in average wages by 3.2%, the demand for most goods and services also increase.

“When people have more money, they tend to buy more stuff,” said Moorehouse. “Gas being one of these goods that people spend their increased incomes on.

Paula Twidal, vice president of AAA, agrees with Moorehouse in their prediction of how gas prices will affect summer travel. Due to solid job and income growth, according to Twidal, consumers will continue to spend their incomes. In fact, families will continue to prioritize travel, especially on holiday weekends where AAA predicts a near-record number of the public to spend their disposable income on travel despite rising gas prices.

Admittedly, according to Moorehouse, the only real price change that could affect this summer’s travel is the price of airline travel.

“Consumers are much more sensitive to changes in the price of airline travel. When the price of airline tickets increase, we often see a pretty large consumer response in form of reduced airline travel.”

As one looks ahead and plans for summer travel, according to AAA, an expected three times more congested traffic will affect flows in and out of larger metropolitan cities. Those who plan to leave Williamsport and head to a nearby city for a holiday weekend trip should especially plan ahead, as the worse conditions will be in the evenings.

According to AAA, the best advice for those wanting to travel this summer to the top spots in Europe or to the palm trees down in Florida, is to plan ahead and book early. The gas prices might rise, but the average wage has also increased and consumers are looking to spend the disposable income on a getaway from the 9-to-5 workday.


Today's breaking news and more in your inbox

I'm interested in (please check all that apply)