November 20, 2009 / 9:30 PM / 10 years ago

UPDATE 3-U.S. highway travel rises as economy recovers

* Scenic states see boost as vacationers drive, not fly

* Nevada sees travel drop as recession hurts gambling

* Much more improvement needed to boost refiner profits

(Adds comments from analyst)

By Timothy Gardner and Tom Doggett

WASHINGTON, Nov 20 (Reuters) - U.S. motorists drove more miles for the fourth month in a row, which could indicate that both the economy and demand for gasoline are starting to recover, analysts said.

U.S. highway travel soared 2.5 percent in September from a year ago, rising to 240.7 billion miles (387.4 billion km), the U.S. Transportation Department said on Friday.

It was the biggest jump in miles traveled since the numbers started rising in June.

In September, highway travel was up in every state except Nevada (down 1.4 percent) and Pennsylvania (down 0.4 percent). Driving also fell 2.3 percent in the District of Columbia.

The sharp drop in Nevada’s highway travel could mean fewer gamblers can afford to go to Las Vegas in the current economy, said Phil Flynn, analyst at PFGBest Research in Chicago.

“The appetite for risk is even taking its toll on Vegas,” he said.

The states with the biggest increase in miles driven were North Dakota (up 6.9 percent), Montana (up 6.9 percent) and South Dakota (up 5.9 percent).

The boost in travel in those scenic states may be partly due to more people opting to drive instead of fly while on vacation, Flynn said.

“Old fashion driving vacations are coming back,” he said.

For the first nine months of the year, the number of miles driven was up 0.3 percent, or about 6.7 billion vehicle miles, the department said. In August highway miles traveled increased by a mere 0.7 percent.

The latest highway data could mean the worst is over for falling gasoline demand as the economy improves, Flynn said.

“Of course we need to see the employment picture improve if we are going to achieve more normal (petroleum) demand growth,” he said.

Until then, Flynn said U.S. oil refiners “are still going to struggle in the near term” to squeeze out decent profits.

Valero Energy Corp (VLO.N), the top U.S. independent oil refiner, said on Friday that it has begun permanently shutting down its plant in Delaware City, Delaware, as the weak economy batters the refining sector. [ID:nN20224848]

The Transportation Department tracks motorists through more than 4,000 automatic traffic recorders operated by state highway agencies. (Additional reporting by Tom Doggett) (Reporting by Timothy Gardner; Editing by Lisa Shumaker)

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