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Short-Term Energy Outlook

Release Date: August 12, 2014  |  Next Release Date: September 9, 2014  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Summer Transportation Fuels Outlook

U.S. Gasoline and Diesel Fuel Prices

EIA expects that regular-grade gasoline retail prices, which averaged $3.58/gal last summer, will average $3.57/gal during the current summer (April through September) driving season. The projected monthly average regular retail gasoline price falls from $3.66/gal in May to $3.46/gal in September. Diesel fuel prices, which averaged $3.89/gal last summer, are projected to average $3.87/gal this summer. Daily and weekly national average prices can differ significantly from monthly and seasonal averages, and there are also significant differences across regions, with monthly average prices in some areas exceeding the national average price by 30 cents/gal or more. Any unforeseen refinery outages or other disruptions to supply also have the potential to increase regional product prices beyond forecast levels in the short term.

Because taxes and retail distribution costs are generally stable, movements in gasoline and diesel prices are driven primarily by changes in both crude oil prices and wholesale margins. The retail price projections reflect falling prices for crude oil, best represented by the Brent crude oil price, which averages about $105/bbl ($2.49/gal) this summer compared with the $107/bbl ($2.54/gal) average of last summer. Any difference between actual crude oil prices and EIA's forecast would be reflected in the price of motor fuels. Absent other factors specific to the gasoline and diesel fuel markets, each dollar per barrel of sustained change in crude oil prices compared with the forecast translates into approximately a 2.4-cent-per-gallon change in product prices.

EIA expects wholesale gasoline margins (the difference between the wholesale price of gasoline and the Brent crude oil price) will average 38 cents/gal this summer, about 3 cents higher than last summer and 4 cents higher than the previous five-summer average. Forecast wholesale diesel fuel margins are 46 cents/gal, 1 cent below last summer's level and 9 cents higher than the previous five-summer average.

As in the case of crude oil, the market's expectation of uncertainty in monthly average gasoline prices is reflected in the pricing and implied volatility of futures and options contracts. New York Harbor RBOB futures contracts for July 2014 delivery traded over the five-day period ending April 3 averaged $2.85/gal. The probability that the RBOB futures price will exceed $3.35/gal (consistent with a U.S. average regular gasoline retail price above $4.00/gal) in July 2014 is about 3%.

Motor Gasoline

During this summer driving season (April through September), projected motor gasoline consumption remains unchanged from last summer's average of 9.0 million bbl/d. Year-over-year increases in highway travel, projected to be 0.7%, are offset by an increase in fleet-wide fuel efficiency. Finished motor gasoline is supplied by four sources: domestic refinery output, fuel ethanol blending, net imports of gasoline and gasoline blending components, and primary inventories. EIA expects that domestic refinery production, including gasoline blendstock output, will increase by 60,000 bbl/d from last summer. Fuel ethanol blending into gasoline is projected to decrease by 3,000 bbl/d from last summer's level to 870,000 bbl/d, which is 9.7% of total gasoline consumption. Projected total gasoline net imports (including blending components) average 240,000 bbl/d, down 7% from last summer.

At the onset of the summer driving season (April 1), total gasoline stocks were down 10 million barrels from a year ago and down 5 million barrels from the five-year average for beginning-of-season stocks. Stock withdrawals have not been a significant motor gasoline supply source for the summer season in recent years, having averaged only 35,000 bbl/d during the previous five summer seasons. This summer, total gasoline stocks are projected to remain almost unchanged, compared with a 31,000-bbl/d draw last summer. Moreover, the absence of a seasonal pattern differs from that of last summer, which saw a sizable draw on inventories during the third quarter. As a result, total gasoline inventories this summer are projected to end the season at 215 million barrels, 4 million barrels below last year's level but 1 million barrels above the five-year average.

Diesel Fuel

Projected consumption of distillate fuel, which includes diesel fuel and heating oil, averages 3.8 million bbl/d this summer, up 37,000 bbl/d (1.0%) from last summer. That growth is driven by increasing manufacturing output and foreign trade.

Distillate fuel is supplied by four sources: domestic refinery output, biodiesel blending, primary inventories, and net imports. EIA expects refinery output of distillate fuel will average 4.9 million bbl/d this summer, up 150,000 bbl/d from last summer. Biodiesel has been a small part of the distillate pool, averaging 93,000 bbl/d last summer and forecast to average about 78,000 bbl/d this summer. Projected distillate fuel net exports average 1.15 million bbl/d this summer, up from 1.06 million bbl/d last summer.

Distillate inventories are projected to start the summer at 112.6 million barrels, down from the 118.6 million barrels recorded at the start of last summer and the five-year average of 138.7 million barrels. Distillate inventories typically build during the summer season in preparation for the heating season. This summer, the build is forecast to average 89,000 bbl/d, up substantially from the 54,000 bbl/d build recorded last summer, but similar to the five-year average summer build of 60,000 bbl/d. End-of-summer stocks are 128.9 million barrels, up slightly from the 128.6 million barrels recorded at the end of last summer, but well below the five-year end-of-summer average of 149.8 million barrels.

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