This Week In Petroleum | |
Released: November 27, 2013 Gasoline prices this fall below year-ago levelDespite this week's increase in the U.S. average retail price of regular gasoline to $3.29 per gallon on November 25, gasoline prices remain near the lowest level of 2013 or last year at this time. Lower global crude oil prices, high profitability for diesel fuel that has been encouraging refiners to increase throughput, high inventories, and the switch to less-costly winter grades of gasoline (Figure 1) are among the factors currently driving gasoline prices. Lower crude costs are one reason gasoline prices are down. Spot prices for Brent crude oil dropped $4.66 per barrel from September 3 to November 25 (Figure 2). West Texas Intermediate (WTI) crude prices, which are much less significant to gasoline price formation than Brent prices, fell by $14.81 per barrel over the same period. The decline in crude oil prices was partly driven by lower demand for crude oil due to seasonal refinery maintenance. EIA's November Short-Term Energy Outlook (STEO) forecasts Brent and WTI prices to decline further to $106 and less than $95 per barrel, respectively, in December, and down further to $101 and $93 by the end of 2014. However, heightened uncertainties surround this forecast because of global crude oil supply disruptions. Increased global demand and higher prices for diesel fuel have increased refining margins, encouraging U.S. refineries to run at high utilization rates for most of this year. While refineries have tried to maximize diesel production to capture these margins, high refinery runs have resulted in significant coproduction of gasoline. These supplies helped push gasoline crack spreads into negative territory for a short period of time and also resulted in large gasoline inventory builds across much of the country. Inventories of gasoline on the East Coast (PADD 1), Gulf Coast (PADD 3), and the Rocky Mountains (PADD 4) were above the five-year average leading up to refinery maintenance season (late September and early October) while the Midwest (PADD 2) and the West Coast (PADD 5) were slightly under. As of September 27, PADD 3 gasoline inventories were 10.6 million barrels above the 5-year average. As refineries undertook maintenance, gasoline inventories were drawn down, but stock levels still remained at or above the 5-year average in some regions, putting downward pressure on gasoline prices. Gasoline prices vary by region (Figure 3). West Coast prices typically exceed the U.S. average due to stricter gasoline specifications in California, the largest market in PADD 5, and the region's relative isolation from other domestic markets. From September 2 to November 25, PADD 5 regular retail gasoline prices averaged 29 cents per gallon more than the U.S. average. Excluding the California price from the West Coast average, the region's premium over the U.S. averaged only 10 cents per gallon. Prices in PADD 5 fell 29 cents per gallon from September 2 to November 25, slightly below the 32 cent-per-gallon drop in the national average price. Gulf Coast (PADD 3) refiners produce over 2.5 times more gasoline than is consumed within that region. This fact, combined with relatively low state and local taxes on gasoline, result in prices that are usually lower than the national average. From September 2 to November 25, PADD 3 gasoline prices fell 27 cents per gallon and averaged 23 cents per gallon less than the U.S. average. Prices in PADD 3 registered a brief dip below the $3.00 mark on November 11, for the first time since February 2011. Prices in the Midwest have been both above and below the national average recently. On September 2, PADD 2 prices were 3 cents per gallon higher than the national average, but by November 25, prices were 10 cents per gallon below the national average. This drop happened despite an October 23 refinery fire and outage at Citgo's 167,000-barrel-per-day refinery in Lemont, Illinois. EIA's November STEO forecasts the U.S. average retail price of regular gasoline at $3.24 per gallon in the fourth quarter of 2013, rising early next year to average $3.33 per gallon in the first quarter of 2014. Gasoline and diesel fuel prices both increase The national average diesel fuel price increased two cents to $3.84 per gallon, 19 cents lower than last year at this time. Prices increased in all regions of the nation except the West Coast, where the price is unchanged from last week at $3.95 per gallon. The largest increase came in the Midwest, where the price was up four cents to $3.83 per gallon. On the East Coast, the price was $3.87 per gallon, three cents higher than last week. Increasing a penny, the Gulf Coast price was $3.75 per gallon, and the Rocky Mountain price was up less than a penny to remain at $3.84 per gallon. Propane inventories fall Heating fuel prices increase The average residential propane price increased by nearly 4 cents per gallon last week to $2.54 per gallon, almost 30 cents per gallon higher than the same period last year. Wholesale propane prices increased by nearly 2 cents per gallon to almost $1.43 per gallon as of November 25, 2013. Text from the previous editions of This Week In Petroleum is accessible through a link at the top right-hand corner of this page. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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