(NerdWallet) - When I originally pitched the idea for this article, it was titled, “What $100 oil could mean for your summer travel.” Back then, $100 oil seemed like a distant possibility. Then prices spiked to over $120 before settling back down to a mere $100. By the time you read this ... who knows.
The point is, nobody can predict what will happen to oil next, yet everybody is curious how it will impact long-delayed summer travel plans. Does it make sense to book flights sooner or later? Is it better to drive or fly? And does anybody remember how to siphon gas (asking for a friend)?
If you don’t feel like reading this whole article, here’s the gist:
The last two years have been a halcyon era for cheap airfare, if little else. Yes, prices are rising quickly now, but unlike food and other inflation-afflicted expenses, they’re rising from a much lower baseline.
My colleague Sally French dug into inflation data to show that flight costs still have a long way to go before they become expensive by historical standards. Even though jet fuel prices have gone way up lately, airfare hasn’t followed quite the same trajectory.
Why? Fuel costs only account for about 30% of operating costs for airlines, according to Hopper, a travel booking platform. So an increase in fuel prices doesn’t necessarily result in a one-to-one increase in airfare. And airlines have ways (such as financial hedging maneuvers that I won’t pretend to understand) of defraying these costs.
All that said, fuel costs and demand are certainly driving prices up. So booking sooner rather than later is a good bet.
The uptick in price for airplane tickets might not kill your summer travel budget, but other transportation costs could. We all know the pain of filling a tank of gas these days. Even if you’re prepared to pay more for fuel, will you even be able to find a rental car? Has their availability normalized since last summer’s shortage?
In a word: Nope.
The average price of rental cars remains outrageously high, costing 39% more in February 2022 than in February 2020, according to the Bureau of Labor Statistics. Compare that to the “measly” 7% increase in lodging costs over the same period and you get the picture. Rental car prices are way more inflated than other parts of a potential travel budget.
Pair that with astronomical fuel prices and reportedly higher rideshare fares, and the message is clear: If you can avoid vacations that require renting a car or driving long distances, do so.
In fact …
National parks are cool, but they’re so summer 2020.
Snarkiness aside, there are good financial reasons to avoid far-flung rural destinations and target bigger, more transit-friendly cities instead. I’ve already talked about how expensive driving will be, but there’s another factor at play: demand. Everyone is still booking travel to rural destinations for some reason, which means you should do the opposite.
Data from AirDNA, a vacation rental tracking platform, suggests that demand for vacation rentals already exceeds pre-pandemic levels across the board. But that recovery is far from uniformly distributed. Coastal urban areas — AKA big cities with good public transportation — still lag far behind other markets. For instance, vacation rental bookings in New York City were down 47% in February 2022 compared to February 2020.
That number is stunning on its own, but it gets downright head-scratching when you consider that New York City 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 the history of humanity has that ever been true?
Nobody knows what will happen to oil prices. And frankly, we don’t even really know how much oil prices will affect airfare prices this summer. But we do know one thing: Driving a car, especially a rented car, will be very expensive.
You might already have your heart set on visiting Maui, where a rental car is all but required, in which case you’ll just have to eat the expense. But if you can switch your priorities, zig where others zag and target big cities that are easy to navigate without a car, you could salvage your budget despite rising fuel costs.
Now someone please tell my friend whether you’re supposed to take your mouth off the siphon hose before or after the gas starts flowing.
