MW Thanks to cheap gas, Americans may travel in record numbers for Memorial Day - and hit pause on other economic worries

By Myra P. Saefong

GasBuddy forecasts the cheapest Memorial Day gas since 2021

U.S. consumer sentiment stands near a record low, but that isn't expected to dampen plans for the Memorial Day weekend, which will see gasoline prices at their lowest for the holiday in years, while the number of American travelers is expected to reach a record high.

"Cheaper gasoline acts as a stimulus for the U.S. economy," said Pavel Molchanov, investment strategy analyst at Raymond James.

Domestic air travel - despite recent problems related to air-traffic control - is forecast to see a year-over-year rise for the holiday, according to travel-services provider and motorist group AAA. That's even as some foreign tourists show an aversion to visiting the U.S. as a result of global trade disputes and other actions by the Trump administration.

Robust holiday travel is good news, especially considering that the University of Michigan's gauge of U.S. consumer sentiment saw a fifth straight monthly drop to a preliminary May reading of 50.8 - the second-lowest level on record.

But if Memorial Day holiday travel ends up at a record high, as AAA forecasts, it will be partly a function of gasoline prices being at four-year lows, Molchanov said.

'A few days at the proverbial beach is an affordable way to relax. In other words, looking at travel data does not offer much clarity on the broader question of recession risk.'Pavel Molchanov, Raymond James

"Consumers might still be cutting back in some areas of spending," especially when it comes to big-ticket items like cars that are subject to tariffs, but "a few days at the proverbial beach is an affordable way to relax," he said. "In other words, looking at travel data does not offer much clarity on the broader question of recession risk."

Still, all else being equal, a $1-a-barrel decline in oil prices equates to $7 billion in annualized gasoline fuel savings for consumers, Molchanov said. Energy accounts for 7% of consumer spending, and the "disinflationary effect is particularly helpful as an offset to higher costs from tariffs."

U.S. benchmark oil prices (CL.1) (CLN25) have dropped 12.8% this year as of Tuesday, according to Dow Jones Market Data. Gasoline prices at the pump, meanwhile, were down about 11% from a year ago, at $3.165 on Tuesday, with the potential to fall to their lowest level for a summer season since the start of COVID-19 pandemic, according to data from GasBuddy.

Against that backdrop, a record 45.1 million Americans are expected to travel at least 50 miles from home over the Memorial Day holiday, which runs from May 22 to May 26 this year, according to AAA. The previous Memorial Day weekend record for travelers was set in 2005.

During the holiday period, AAA expects to see 39.4 million people travel by automobile, which is 1 million more than last year; 3.61 million by air, a nearly 2% year-over-year increase; and 2.08 million by other means, including train, bus or cruise, which is an 8.5% increase over last year.

Drop in gas prices

Despite economic worries, travelers have been encouraged by lower prices for gasoline.

GasBuddy forecasts a national average gas price of $3.08 on Memorial Day, the cheapest retail price for the holiday since 2021. It also said that would be the lowest inflation-adjusted price for Memorial Day since 2003, excluding 2020, which was heavily influenced by the pandemic.

Workers who earn $18 an hour would only have to work 10 minutes to be able to buy a gallon of gasoline this summer, Patrick De Haan, GasBuddy's head of petroleum analysis, told MarketWatch.

GasBuddy expects an average price of $3.02 over the entire summer, starting on Memorial Day and running through Labor Day. The national average may even fall below $3 this summer, De Haan said, which would be the lowest summer price since 2020.

Overall, U.S. gasoline demand has been "solid" so far this year, with some regions reporting 3% year-over-year growth, as lower crude prices lead to a reduction in gasoline prices, said Randall Fenton, global co-head of energy, commodities and shipping at brokerage firm BGC Group $(BGC)$.

The U.S. crude benchmark has declined this year partly due to worries about a potential recession that could hurt energy demand; higher oil production from the Organization of the Petroleum Exporting Countries and its allies; and U.S.-Iran talks surrounding a nuclear deal. A deal, though reportedly unlikely anytime soon, would lead the U.S. to lift sanctions on Iran's oil, freeing up supply.

Gasoline demand is likely to stay "robust," Fenton said. It may even climb in the second half of the year, assuming the economy doesn't enter a recession, he said.

Oil prices, meanwhile, have climbed over the past two weeks, but market players expect the major selloff in crude oil earlier this month to "filter through into refined products" like gasoline, said Andrew Woods, market reporter for industrials at global commodity markets data provider Expana.

There may be more weakness in oil prices in the current second quarter and into the third quarter, the forecasting team at Expana told MarketWatch. "Our macroeconomic analyses are clearly warning of a likely downturn in the global economy that could lead to a recession, and this will weigh in on [oil] demand," they said.

However, the downside potential for oil prices is "deemed limited," the team said, as $60 a barrel is where it starts to "hurt producing countries significantly, and current prices aren't far from that level."

Air-travel woes

Meanwhile, travel by air has faced demand issues directly linked to President Donald Trump's policies, as well as problems related to the U.S. air-traffic-control system.

The back-and-forth on U.S. trade policies targeting certain countries has likely had an "impact on the desire for tourists to travel here [to the U.S.] this summer," said GasBuddy's De Haan. Visitors from other countries may be concerned about the policies and believe that it's best to "steer clear" of the U.S. for now, he said.

All that has contributed to lower oil prices, "but at the cost of economic upheaval," he said, which is "not a great tradeoff."

During a post-earnings call in early April, Delta Air Lines Inc. $(DAL)$ CEO Edward Bastian said growth has "largely stalled" given broad uncertainty around global trade.

On an international level, there seems to be a lack of visitors to the U.S. - and that likely has to do with how the world feels about the U.S. right now, given Trump's trade policies, said Denton Cinquegrana, chief oil analyst at the Oil Price Information Service. (OPIS is a unit of Dow Jones, which is also the publisher of MarketWatch.)

At the domestic level, however, plenty of people are flying, he said, with data from the Transportation Security Administration showing that on May 19, passenger volume averaged 2.79 million. The last time there were 3 million or more passengers was on Dec. 1, 2024, said Cinquegrana, who predicts there will be another 3 million passenger day "very soon."

For now, jet fuel is "pretty cheap" compared with other fuels, he said. Globally, the average price for jet fuel stood at $1.994 a gallon for the week ending May 16, according to the International Air Transport Association, a trade association for the world's airlines. That's down 15.4% from the prior year's average for the same weekly period.

There are multiple markets where jet fuel on a spot basis is cheaper than gasoline or diesel, said Cinquegrana. That's a far cry from 2022, "when refiners could make jet fuel at huge margins" as travel restrictions eased and demand for jet fuel climbed in the wake of the pandemic.

-Myra P. Saefong

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May 21, 2025 16:28 ET (20:28 GMT)

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