We'll be driving less this holiday weekend -- here's what that will mean
Over the past few years, the Fourth of July has evolved into a significant measure of the nation's economic mood. Most children are out of school, and most parents have the day off, so millions hit the highway for short vacations that reveal changes in consumer optimism, disposable income, and the effects of gas prices.
Seasonal gas hikes are a summer tradition: as demand surges, prices shoot up, generally peaking between June and September. While inconvenient, the hikes usually aren't too significant. In most years, drivers simply dig a little deeper into their pockets to pay the few extra cents per gallon.
In 2008, however, the game changed. When U.S. gas prices broke the $4-per-gallon threshold, many drivers began to curtail their driving. The effect was dramatic: last July 4, only 37.8 million people drove or flew more than 50 miles from home -- a 10.5 percent drop from the previous year. (The International Energy Agency released its Medium Term Oil Market Report on Monday, June 29, forecasting oil demand through 2014 as increasing 0.6 percent annually, or 540,000 barrels per day -- far lower than its previous calculation of 1.1 percent, or a million barrels a day.)
In many ways, the July 4 drop-off was a miner's canary: the effects of higher gas prices rolled through the economy, leaving few parts of American life untouched. Like a Rube Goldberg contraption, the cost of gas drove up the price of food and air travel, which curbed discretionary spending, which hurt businesses that rely on impulse purchases, which exacerbated unemployment, which helped push a teetering financial system to the brink of collapse.
What a diference a year makes. On Independence Day this week, 37.1 million travelers will drive or fly more than 50 miles from home, according to AAA predictions: a 1.9 percent drop from last year, which is a significant improvement over last year's tumble. And with the price of air travel falling precipitously, AAA anticipates a 4.9 percent increase in leisure-flight bookings this year. Car-rental rates are also expected to rise by about 5 percent.
That's actually very good news. Gas prices this summer aren't expected to reach 2008 numbers, but many experts anticipate a $3-per-gallon tag this year -- an increase from May, when the dominant wisdom was that prices would top out at $2.50 per gallon.
On average, each family taking a trip on the Fourth will spend $1,160. Given that unemployment has risen for the past 13 months, now swollen to a massive 9.4 percent, it's amazing that so many families are planning Indepndence Day getaways. The American wallet is far more tattered than it was a year ago, when unemployment hovered at around 5.6 percent nationally. But this summer's combination of lower gas prices, lower ticket prices, and an optimistic outlook could produce a nice little windfall for the travel industry -- and the economy.