What do oil prices mean for my summer trip?
(NerdWallet) – When I originally pitched the idea for this article, it was titled “What $100 Oil Could Mean for Your Summer Trip.” At the time, $100 oil seemed like a distant possibility. Then, prices spiked to over $120 before dropping back down to just $100. By the time you read this… who knows.
The thing is, no one can predict what will happen to oil next, but everyone is curious how it will affect long-delayed summer travel plans. Does it make sense to book flights early or late? Is it better to drive or fly? And does anyone remember how to siphon gas (ask a friend)?
If you don’t feel like reading this whole article, here’s the gist:
- Airfares are rising, but not as much as one might think.
- Renting and refueling a vehicle will cost more than usual.
- To find a good plan, go to cities well served by public transport.
The end of cheap plane tickets?
The past two years have been a boom era for cheap airfare, if nothing else. Yes, prices are rising rapidly now, but unlike food and other inflation-related expenses, they are rising from a much lower baseline.
My colleague Sally French has dug into inflation data to show that flight costs still have a long way to go before they become high by historical standards. Even though jet fuel prices have been rising lately, air fares have not followed quite the same trajectory.
Why? Fuel costs only make up about 30% of airline operating costs, according to Hopper, a travel booking platform. Thus, an increase in fuel prices does not necessarily lead to an individual increase in airfares. And airlines have ways (like financial hedging maneuvers that I don’t pretend to understand) to cover those costs.
That said, fuel costs and demand are certainly pushing prices up. So booking as early as possible is a good bet.
Driving is really expensive
Rising airfares might not kill your summer travel budget, but other transportation costs might. We all know the pain of filling a gas tank these days. Even if you’re willing to pay more for fuel, will you be able to find a rental car? Has their availability normalized since last summer’s shortage?
In a word: No.
The average rental car price remains shockingly high, costing 39% more in February 2022 than in February 2020, according to the Bureau of Labor Statistics. Compare that to the “mean” 7% increase in hosting fees over the same period and you get the picture. Rental car prices are far more inflated than other elements of a potential travel budget.
Couple that with astronomical fuel prices and seemingly higher carpooling rates, and the message is clear: if you can avoid vacations that require renting a car or traveling long distances, do it.
In reality …
Do you remember cities?
National parks are cool, but it’s so summer 2020.
Smirking aside, there are good financial reasons to avoid remote rural destinations and instead target larger, friendlier cities. I’ve already talked about the cost of driving, but there’s another factor at play: demand. Everyone still books trips to rural destinations for some reason, which means you should do the opposite.
Data from AirDNA, a vacation rental tracking platform, suggests demand for vacation rentals is already exceeding pre-pandemic levels across the board. But this recovery is far from evenly distributed. Coastal urban areas – AKA big cities with good public transport – are still far behind other markets. For example, New York vacation rental bookings were down 47% in February 2022 compared to February 2020.
This number is staggering in itself, but it becomes downright confusing when you consider that New York is one of the easiest destinations to visit without renting a car. In other words, it might be financially prudent to visit the Big Apple this year.
When in human history has this ever been true?
No one knows what will happen to oil prices. And frankly, we don’t even really know how much oil prices will affect airline ticket prices this summer. But we know one thing: driving a car, especially a rental car, will be very expensive.
You might already want to visit Maui, where a rental car is almost mandatory, in which case you just have to pay for it. But if you can shift your priorities, zigzag where others zag, and target big cities that are easy to navigate without a car, you could save your budget despite rising fuel costs.
Now someone please tell my friend if you are supposed to remove your mouth from the siphon pipe before or after the gas starts flowing.
Suggest a fix