Released on November 16, 2005
(Next Release on November 23, 2005)

Most Valuable
In recent days, major league baseball has voted for their Most Valuable Players (MVP) in both the American and National Leagues. Both votes were relatively close, with Alex Rodriguez of the New York Yankees beating David Ortiz of the Boston Red Sox in the American League and Albert Pujols of the St. Louis Cardinals edging Andruw Jones of the Atlanta Braves. Debates over who would win both awards raged amongst baseball fans over the past couple of weeks. In oil markets, as gasoline prices have plummeted over the past several weeks, EIA has noted that gasoline supplies have increased due to both an increase in refinery production and a surge in imports. But which of these factors have been “most valuable” in terms of adding supply and reducing prices? While this debate has not invoked a similar passion as the baseball MVP votes did, it is instructive to look at the impacts both had in adding gasoline supply recently.

As the graph above indicates, increases in both production and imports have been important in reducing gasoline prices, but the surge in imports came at a critical time. While gasoline production increased by over 1 million barrels per day in a two-week period in early October, imports surged by significantly less than that in absolute volumes. But just as many voters were giving extra weight to David Ortiz because many of his hits came at key moments in games that helped lead his team to victory, the timing of gasoline imports was critical in keeping gasoline markets as well-supplied as they were in early October.

On September 2, within days of Hurricane Katrina making landfall, the International Energy Agency (IEA) instructed its member countries to release strategic reserves of oil to help add extra supply into the market. For the United States, this meant announcing the sale of up to 30 million barrels of crude oil from the Strategic Petroleum Reserve (less than half of which was eventually sold). But for some European countries, this meant releasing strategic reserves of key petroleum products, especially gasoline. Given the logistics in making these product reserves available and transported to the United States where they were needed meant that they would likely begin to reach our shores by the end of September. Little did the IEA know that this meant they would be arriving just as a second hurricane (Hurricane Rita) was wreaking havoc on the Lake Charles and Port Arthur refining centers. Thus, while many analysts, including some of us here at EIA, guessed that gasoline inventories would plummet as a result of these refinery outages, the cavalry came in the form of the surge in gasoline imports to prevent such a drop in inventories. So, while the increase in domestic production over the past several weeks has been instrumental in adding supply and bringing down retail gasoline prices, it was the fortuitous timing of the surge in gasoline imports (setting all-time records in 3 successive weeks) that was critical in helping to keep gasoline prices from going higher following Hurricane Rita, and to help them start dropping substantially thereafter. Of course, imports often increase after prices rise substantially, as higher prices sends a strong signal to the global marketplace that additional supplies are needed. Without the high prices, it is unclear how much of the additional gasoline supplies from European strategic storage would have actually arrived here. During the last week of November, EIA will release its monthly data showing where these additional gasoline imports came from during the month of September. Circumstantial evidence supports the notion that they came from Europe, but the monthly data could confirm this. Regardless, a surge did occur and arrived just in time to keep U.S. gasoline markets as well-supplied as could be expected, under the circumstances.

Residential Heating Fuel Prices Continue to Decrease
Residential heating oil prices decreased again for the period ending November 14, 2005. The average residential heating oil price dropped 4.3 cents from the previous week to reach 246.5 cents per gallon, an increase of 44.8 cents from this time last year. Wholesale heating oil prices decreased 7.9 cents to reach 177.4 cents per gallon, an increase of 37.5 cents compared to the same period last year.

The average residential propane price decreased 1.1 cents, to 194.4 cents per gallon. This was an increase of 25.5 cents over the 168.9 cents per gallon average for this same time last year. Wholesale propane prices decreased 7.8 cents per gallon, from 112.5 cents to 104.7 cents per gallon. This was an increase of 9.1 cents from the November 15, 2004 price of 95.6 cents per gallon.

U.S. Retail Gasoline and On-Highway Diesel Prices Fall Again
The U.S. average retail price for regular gasoline dropped by 8.0 cents to 229.6 cents per gallon, falling for the sixth week in a row; this price was still 32.7 cents higher than this time last year. Over the past six weeks, retail prices have dropped a total of 63.2 cents per gallon. Prices were down throughout the country, with the Rocky Mountain region seeing the largest regional decrease of 11.7 cents to 234.7 cents per gallon. The Midwest had the lowest regional price in the country, falling 5.3 cents to 217.8 cents per gallon. East Coast prices fell by 10.1 cents to 229.5 cents per gallon. The West Coast averaged 254.7 cents per gallon, the highest regional average price in the country, after falling 7.6 cents; California prices lost 7.7 cents to 258.2 cents per gallon.

Retail diesel fuel prices lost another 9.6 cents to reach 260.2 cents per gallon, the lowest price since August 29, 2005. Over the last three weeks, the U.S. average retail diesel price has dipped 55.5 cents per gallon. Prices were down throughout the country, with the Rocky Mountains seeing the largest regional decrease of 14.1 cents to 276.6 cents per gallon, still the highest regional average price in the country. East Coast prices were down 9.2 cents to 256.5 cents per gallon, the lowest regional price in the nation. West Coast prices averaged 273.8 cents per gallon after falling 8.3 cents.

Propane Reports First Major Seasonal Draw
The late season stockbuild that reached more than 70 million barrels may finally have run its course following the first major stock draw of the heating season last week that measured 2.9 million barrels. With last week’s decline, U.S. inventories of propane fell to an estimated 67.5 million barrels as of November 11, 2005, a level that, nevertheless, remains at the upper limit of the average range for this time of year. Regional inventories were mixed with inventories remaining flat in the East Coast, up by 0.3 million barrels in the Midwest, but down by 3.1 million barrels in the Gulf Coast. The combined Rocky Mountain/West Coast regions posted a 0.1-million-barrel decline last week that was in sharp contrast to the prior week’s robust 0.7-million-barrel gain. Propylene non-fuel use inventories also lost 0.1 million barrels last week to 3.7 million barrels, a level that accounted for a slightly higher 5.5 percent share of total propane/propylene inventories from the prior week’s 5.4 percent share.

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