Gasoline Price Volatility Is a Concern This Summer
Notes:
- March began with gasoline spot prices showing large increases over crude oil. Spot prices were nearly 20 cents per gallon over the already high crude oil prices, when normally the spread would be half that size. This spread was comparable to the spread seen in August 1997 when high demand, low stocks, and some refinery problems cause prices to surge.
- By the end of March the spread had fallen to about 16 cents per gallon, and by mid April was at about 11 cents per gallon as the inventory situation improved. Crude oil prices have also been falling, pulling gasoline spot prices down.
- Retail prices, which lag behind changes in the spot market, are turning down also. Regular gasoline prices peaked the week of March 20 at $1.53 and fell to $1.48 the week of April 10.
- Looking toward the summer, the situation could ease if the gasoline inventories continue to improve. However, it will not improve to the extent of creating a level that could buffer the market against unexpected supply problems or demand surges during the peak demand months. Moreover, the potential for price volatility is increased over last summer because of the high refinery capacity utilization rates that will be needed to meet summer demand.
- In summary, there is an increased potential for gasoline price volatility this year over last as a result of low inventories and high refinery utilization rates.