Slide 2 of 11
Notes:
- In order to illustrate and quantify, to a large
extent, the various market forces driving gasoline prices, we begin by
decomposing those factors according to their location within the supply chain,
i.e., the international crude market, U.S. wholesale gasoline markets, and the
retail segment.
Historically, variation in gasoline prices usually
stems from changes in crude oil prices. As the major feedstock in the
production of gasoline, shifts in the balance between supply and demand in
crude markets explain a large portion of observed movements at the retail
level.
- But shifts in the wholesale gasoline supply/demand
balance also contribute to price pressure or movements at both the wholesale
and retail levels beyond that stemming from crude oil markets.
- Hence, to explain gasoline price behavior, we examine the drivers underlying:
- International crude oil prices (which impact more than just crude oil prices)
- Crude oil to spot prices
- How crude market influences product markets
- Domestic gasoline market contribution
- Gasoline price volatility
- Spot prices to retail prices: Do retail prices rise
quickly but fall slowly? That is, are they downward sticky?
