What will affect fuel sales this Thanksgiving?

There will likely be lower demand overall for fuel and convenience items this Thanksgiving despite an increase in travel, according to a report by digital marketplace Upside. However, there are many factors to fuel activity, and the report shared both tailwinds and headwinds that could change the course of fuel demand, price and profits.

The American Automobile Association (AAA) said 79.9 million travelers are projected to travel 50 miles or more from home over the Thanksgiving holiday, the seven-day period from Tuesday, Nov. 26, to Monday, Dec. 2. Of those travelers, 71.7 million will travel by car, which is an additional 1.3 million people on the road compared to last year, according to AAA.

"Despite an expected uptick in travel for Thanksgiving, we also anticipate a decrease in normal business activity. Therefore, we’re projecting lower demand for fuel and convenience items on the whole," Upside said in its report. 

Washington-based Upside shared what could positively and negatively affect fuel during this period.

Supply and Demand Tailwinds

Several factors could contribute to lower fuel prices for consumers and higher profits for retailers, according to the report.

The economies of other high-income countries are performing relatively poorly compared to the U.S. Slower economic activity abroad might keep crude oil prices low, which would translate to lower domestic sign prices, according to Upside. It also expects further meaningful drops in rack and sign prices in the west, as the most populated regions in California complete their winter blend transitions.

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In addition, the Federal Reserve issued a 0.25% cut in interest rates and is expected to make another cut in December, so the perception that inflation is cooling will spur economic activity from consumers and businesses alike, the report said.

Healthy profit margins will also likely continue through November.

Supply and Demand Headwinds

There are also some concerns that could lead to interruption in supply, increasing prices and decreasing profits.

The Organization of the Petroleum Exporting Countries Plus (OPEC+) announced it will extend production cuts through December 2024, which will keep crude prices slightly elevated, Upside said.

Inclement weather is unpredictable and could continue to impact both supply and demand in the south.

Finally, elevated risk of conflict in the Middle East could interrupt the global supply of oil coming from the region, increasing sign prices for consumers. When this happens, retailers often hesitate fully passing on price increases in favor of a gradual approach that doesn’t isolate customers, Upside said. The approach allows profits to temporarily drop.

Related:Shoppers still concerned about inflation but focused on healthy eating

This story was originally featured on CSP Daily News, a sister publication of Supermarket News.