Sweet & Sour: High gasoline prices fail to break U.S. motoring habit

This summer, I decided to follow the example of millions of Americans and take a driving holiday in the U.S. My trip took me down from Montreal in Canada down through the verdant state of Vermont, the old charm of New Hampshire and on to Cape Cod in Massachusetts, where I am chilling out before returning to the Dubai heat.

It is the middle of the what is known here as the "driving season", the annual motoring holiday, and the numbers of people taking to the roads will determine just how much gasoline is consumed in this biggest petrol guzzling state on earth. That, in turn, will determine how much crude oil the U.S. will have to import to keep American cars on the roads.

Despite local grumbling about the rising cost of filling up - gasoline prices this year are 30 per cent higher than they were a year ago - demand for motor fuel is at a record high this year. The American Automobile Association estimates that 28 million motorists will travel to destinations at least 100 miles away from home this summer.

More and more Americans have tended to avoid the long delays at U.S. airports because of tighter security after the September 11 attacks and are taking to the roads instead as their preferred mode of transport. Internet companies have been offering special deals to help Americans save up while filling up, while credit card companies are also offering rebates to customers.

This strong demand for gasoline, low inventories in the industrialised countries and a fairly balanced oil market have propped up oil prices so far this year, a situation that many analysts say will linger at least until the next Opec meeting.

This state of affairs means that the Opec ministers meeting in Vienna on July 31 will not be under pressure to do much at this stage, until they meet again in September when they might start considering a cut in supplies.

The price of oil is very near the top of Opec's preferred range of $22-$28 per barrel even with a little bit of cheating by its members, save Iraq which is still struggling to return to normal production. Prices will ease off if Iraqi oil production is ramped up in coming months but the incremental oil will not cause a severe reversal in these tight market conditions.

Despite high prices, U.S. highways are expected to be busier than ever this summer. For now, the American motorist is in the driver's seat and his habits are just one of the many factors that the strategists at Opec will have to take into account.

Kate Dourian is Middle East editor of energy information and pricing service, Platts, a division of McGraw-Hill Companies