Different Factors Impact Different Aspects of Gasoline Price
Source: EIA Monthly Retail Prices, Reuters Spot Regular Conventional Gasoline Prices, EIA Refiners Acquisition Cost of Crude OIl
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?