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This Week in Petroleum

Release date: May 23, 2018  |  Next release date: May 31, 2018

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Rising crude oil prices are contributing to higher gasoline prices heading into Memorial Day weekend

Heading into the 2018 Memorial Day weekend, regular gasoline prices averaged $2.92 per gallon (gal) nationally on May 21, up from last year’s price of $2.40/gal before the holiday weekend. This year marks the highest price ahead of the Memorial Day weekend since 2014, when the national average price of regular gasoline was $3.67/gal (Figure 1). Relatively higher crude oil spot prices, strong gasoline demand, and falling gasoline inventories are all factors contributing to higher gasoline prices.

Figure 1. U.S. average regular gasoline price

EIA forecasts that gasoline prices will be higher this summer compared with last summer primarily because EIA expects Brent crude oil prices to average $22 per barrel (b) higher than during last summer. U.S. gasoline prices have been more closely tied to Brent crude oil prices than to West Texas Intermediate prices. The Brent price has increased significantly in 2018, averaging $78.17/b the week of May 18, 2018, which is a year-over-year $26.41/b (51%) increase from the same week in 2017. Because gasoline taxes and retail distribution costs have been generally stable, movements in gasoline and diesel prices have been mainly the result of changes in crude oil prices, wholesale margins, and inventories.

EIA expects U.S. 2018 summer season (April through September) regular gasoline prices to average $2.90/gal, 49 cents higher than last summer. For all of 2018, EIA projects that U.S. regular gasoline prices will average $2.79/gal. The price of gasoline typically increases during spring because of the switch from winter-grade gasoline to the more expensive summer-grade gasoline. This year, the average price for regular gasoline has increased by 22 cents/gal (8%) since the start of summer driving season in April.

U.S. gasoline consumption has remained relatively high, putting additional upward pressure on prices. As of May 11, 2018, the four-week average U.S. demand was 9.4 million barrels per day (b/d), approximately 64,000 b/d (1%) higher than the May 12, 2017 levels. AAA (in association with IHS Markit) expects more than 41.5 million Americans will travel this weekend, nearly 2 million more travelers than last year and the highest travel volume since 2005.

Decreasing gasoline inventories, including finished gasoline and gasoline blending components, are also contributing to the recent increase in gasoline prices. While 2018 inventories have remained higher than the five-year average, they have remained lower than 2017 inventory levels for the past five weeks.

Retail gasoline prices can vary significantly within the United States because of regional supply and demand balances, gasoline specification requirements, and taxes (Figure 2). Petroleum Administration for Defense District (PADD) 3 (Gulf Coast), which has more than half of U.S. refining capacity and produces more gasoline than it consumes, generally has the lowest retail gasoline prices in the country. PADD 5 (West Coast) retail gasoline prices are typically the highest in the country because of the region’s tight supply and demand balance, isolation from additional supply sources, and gasoline specifications that are more costly to meet. In 2018 through May 21, average Gulf Coast prices are 27 cents/gal lower than the national average, and West Coast prices are 56 cents/gal higher.

Figure 2. Regional & U.S. average gasoline prices

U.S. average regular gasoline and diesel prices increase

The U.S. average regular gasoline retail price increased 5 cents from last week to $2.92 per gallon on May 21, 2018, up 52 cents from the same time last year. Midwest prices increased nearly seven cents to $2.85 per gallon, Gulf Coast prices increased over six cents to $2.68 per gallon, Rocky Mountain prices increased nearly five cents to $2.97 per gallon, East Coast prices increased four cents to $2.86 per gallon, and West Coast prices increased three cents to $3.44 per gallon.

The U.S. average diesel fuel price increased nearly 4 cents to $3.28 per gallon on May 21, 2018, 74 cents higher than a year ago. Midwest and Gulf Coast prices each rose over four cents to $3.22 per gallon and $3.06 per gallon, respectively, East Coast prices rose nearly four cents to $3.27 per gallon, and West Coast and Rocky Mountain prices each rose over three cents to $3.77 per gallon and $3.35 per gallon, respectively.

Propane/propylene inventories rise

U.S. propane/propylene stocks increased by 0.7 million barrels last week to 41.1 million barrels as of May 18, 2018, 13.5 million barrels (24.7%) lower than the five-year average inventory level for this same time of year. Midwest and Rocky Mountain/West Coast inventories increased by 1.1 million barrels and 0.3 million barrels, respectively, while Gulf Coast and East Coast inventories decreased by 0.5 million barrels and 0.1 million barrels, respectively. Propylene non-fuel-use inventories represented 6.8% of total propane/propylene inventories.

For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.

Tags: crude oil , gasoline , inventories/stocks , prices , STEO (Short-Term Energy Outlook) , weekly

Retail prices (dollars per gallon)

Retail price graphs
  Retail prices Change from last
  05/21/18 Week Year
Gasoline 2.923 0.050 0.524
Diesel 3.277 0.038 0.738

Futures prices (dollars per gallon*)

Futures price graphs
  Futures prices Change from last
  05/18/18 Week Year
Crude oil 71.28 0.58 20.95
Gasoline 2.233 0.044 0.581
Heating oil 2.266 0.044 0.683
*Note: Crude oil price in dollars per barrel.

Stocks (million barrels)

Stock price graphs
  Stocks Change from last
  05/18/18 Week Year
Crude oil 438.1 5.8 -78.2
Gasoline 233.9 1.9 -6.0
Distillate 114.0 -1.0 -32.3
Propane 41.092 0.734 -2.594