What Factors Will Impact Fuel Sales This Thanksgiving?

Several factors will influence fuel sales and prices during the Thanksgiving period, as detailed in a report by the digital marketplace Upside. Here’s an overview of both the tailwinds (positive factors) and headwinds (negative factors) that could impact fuel demand, prices, and profits:

Tailwinds (Positive Factors)

1. Increased Travel: The American Automobile Association (AAA) expects nearly 80 million travelers during Thanksgiving, with 71.7 million traveling by car. This increase in road trips could drive higher demand for fuel, though the overall demand might be tempered by other factors.
2. Lower Global Crude Prices: Economic slowdown in high-income countries, such as parts of Europe, could keep crude oil prices lower, benefiting U.S. consumers with reduced fuel costs. Additionally, winter blend transitions in California may lead to lower rack and sign prices on the West Coast.
3. Federal Interest Rate Cuts: A 0.25% rate cut by the Federal Reserve, with expectations of another in December, could ease inflation concerns. As inflation is perceived to cool, consumer and business activity may rise, stimulating travel and, consequently, fuel demand.
4. Healthy Profit Margins for Retailers: Due to these favorable conditions, retailers are likely to maintain healthy profit margins throughout November, as fuel prices remain stable and demand for travel fuels up.

Headwinds (Negative Factors)

1. OPEC+ Production Cuts: The OPEC+ decision to extend production cuts until December 2024 could keep crude oil prices elevated, leading to higher fuel prices despite lower global economic activity.
2. Inclement Weather: Unpredictable weather events, particularly in the southern U.S., could disrupt fuel supply chains, driving up prices and potentially reducing the availability of fuel in certain regions.
3. Geopolitical Risks: Tensions in the Middle East pose a significant risk to global oil supply. Any escalation in conflict could disrupt oil production and supply from the region, which would likely increase fuel prices. Retailers may adopt a cautious approach in passing on these price increases, choosing to raise prices gradually, which could lead to temporary profit losses.

Overall Outlook

While travel demand is expected to rise, especially with an increase in road trips, fuel demand and convenience items may see lower overall sales due to decreased business activity during the holiday period. Retailers could face fluctuations in supply and prices depending on the evolution of geopolitical and weather-related challenges. The final impact on fuel sales will largely depend on the balance between these positive and negative factors.