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No Holiday From Crude’s Rise

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No Holiday From Crude’s Rise

Record Gas Prices 
May Disrupt Plans 
For Fourth of July
By JESSICA RESNICK-AULT
July 3, 2008; Page C7

LAS VEGAS — Don’t expect any fireworks from U.S. gasoline demand this Fourth of July.

[Oil Futures]

The year’s peak for gasoline demand often occurs in July and around Independence Day, a popular time around which Americans plan road trips and vacations. Record gasoline prices likely won’t keep consumption from bumping up in the summer, but it will be a far cry from the fuel use seen in recent years.

“This is a critical weekend for gasoline demand,” said Geoff Sundstrom, spokesman for AAA automobile club.

How much Americans decide to drive over the coming weekend may set the tone for the rest of the year. Refiners often book healthy profits ahead of the holiday by supplying gasoline stations with big volumes at high prices.

Disappointing demand could signal little hope for earnings improvement in a difficult year.

Crude-oil prices are behind the increase at the pump despite falling demand in the U.S., the largest gasoline consumer in the world. Oil futures’ scorching run has been underpinned by demand from Asia, and the market tends to disregard bearish data from the U.S., which means U.S. drivers are unlikely to see relief soon.

Wednesday, crude-oil futures ended 1.8% higher at $143.57 a barrel, a record, on the New York Mercantile Exchange. After the close of floor trading, the front-month contract rose as high as $144.32.

Gas demand for the Fourth of July fluctuates year to year, with more vacationers leaving home if Independence Day falls adjacent to a weekend, which it does this year. Despite that, the AAA says 1.3% fewer people plan to travel this year.

For the first time in a decade, Americans are saying they will be traveling less.

Retail gasoline prices set a record at $4.092 a gallon Wednesday, according to the AAA’s Daily Fuel Gauge Report. This year, demand may continue to fall after Independence Day, as drivers try to cut back on nonessential trips, said Mr. Sundstrom. After the weekend, prices at the pump may move higher, potentially rising five to 10 cents, the AAA forecasts.

High gasoline prices may be putting a damper on some vacationers’ plans to drive, while a glum economic outlook may deter others.

“There are going to be more people who hold off on driving vacations this year due to real or irrational fears of job loss,” said Bryan Caviness, senior vice president at DBRS, a ratings agency.

Gasoline demand has declined significantly this year for the first time since 1991, said Ron Planting, an economist with the American Petroleum Institute.

According to the Energy Information Administration, U.S. gasoline demand averaged 9.34 million barrels a day in the four weeks ended June 27, down 1.7% from June 2007.

The record high for U.S. gasoline use for any month was set in July 2007 at 9.622 million barrels a day, according to the EIA.

–Susan Daker in Las Vegas and David Bird in New York contributed to this article.

Write to Jessica Resnick-Ault at [email protected]

http://online.wsj.com/article/SB121500604366622827.html

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