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Petroleum & Other Liquids

This Week in Petroleum

Release date: November 25, 2020  |  Next release date: December 2, 2020

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Pre-Thanksgiving retail gasoline prices are the lowest since 2015

The U.S. average regular retail gasoline price across all formulations (conventional and reformulated) on the Monday before Thanksgiving this year was $2.10 per gallon (gal), the lowest retail price for this time of year since 2015 (Figure 1). Relatively low gasoline prices reflect lower crude oil prices, less overall demand for gasoline, and gasoline inventories that remain higher than both 2019 levels and the five-year (2015–19) average. Rising positive case counts of the 2019 novel coronavirus disease (COVID-19) and guidance from the Centers for Disease Control and Prevention (CDC) discouraging holiday travel are putting additional downward pressure on gasoline demand.

Figure 1. Weekly U.S. average regular gasoline retail price

Low demand for refined products globally, especially with resurging cases of COVID-19 in many countries, has reduced refinery demand for crude oil, which has remained low throughout the year. Spot market prices for Brent crude oil were $45.00 per barrel (b) ($1.02/gal) on November 23, about $19.67/b (29%) less than the Monday before Thanksgiving in 2019 and about $10.96/b (20%) less than the average pre-Thanksgiving price during the past five years. Historically, the price of crude oil accounts for at least 50% of the total retail gasoline price in the United States (averaging 54% in 2019). On November 23, it accounted for about 51% of the retail gasoline price, which reflects a relative increase over previous weeks since the onset of the COVID-19 pandemic. Crude oil prices are one of the more variable portions of retail gasoline prices, compared with other components such as taxes or distribution and marketing costs. Since March, the per-gallon price of crude oil has accounted for less than 50% of retail gasoline prices; it accounted for an estimated 43% of retail prices in October after falling to as low as 25% of the pump price in April.

Retail gasoline prices since September have been trending higher than their summer levels (May through August), which has occurred only one other time in the previous five years. The U.S. average regular retail gasoline price increased from an average of $2.09/gal from May through August to an average of $2.15/gal from September through November 23. Similarly, in 2017 retail prices increased in the fall over summer levels, likely because of significant disruptions in gasoline production brought on by Hurricane Harvey and an otherwise active hurricane season in that year. Although similar weather-driven supply disruptions occurred this year, lower gasoline demand during the summer of 2020 is also contributing to the relatively higher fall prices.

The COVID-19 outbreak has resulted in consistently lower demand for petroleum products (as measured by product supplied) since April. According to the U.S. Energy Information Administration’s (EIA) Weekly Petroleum Status Report, product supplied of finished motor gasoline in the United States averaged 8.1 million barrels per day (b/d) for the week ending November 20, and it has averaged about 837,000 b/d less than the five-year average since September (Figure 2). Although demand in the fall has increased compared with the summer, it has still remained consistently lower than the five-year average. In its November Short-Term Energy Outlook, EIA forecasts that gasoline demand in November 2020 will average 8.6 million b/d, assuming that gasoline demand will increase in the lead up to the Thanksgiving holiday.

Figure 2. U.S. gasoline product supplied

The American Automobile Association (AAA) expects a 4.3% decline in Thanksgiving holiday travel by automobile in 2020 compared with 2019 and a 10% drop in travel overall. According to AAA, this decline would be the largest one-year decline since the 2008 recession. The decline is even sharper for air travel, which AAA expects to fall 47.5%, and for other travel (bus, train, cruise), which it expects to fall 76.2%. Holiday traffic is expected to peak on November 25, the Wednesday before Thanksgiving. AAA cited rising cases of COVID-19, renewed state-level quarantine restrictions, and new CDC travel health notices as reasons for the drop. In particular, AAA’s report notes that a relatively smaller decline in car travel compared with air and other travel reflects a wait-and-see approach to holiday travel as potential travelers continue to assess the risk of such trips.

Less demand this year is contributing to rising gasoline inventories (Figure 3). Gasoline inventories are usually low in November because of increased gasoline demand for holiday travel and because of lower refinery production as refiners come out of their October maintenance. By the beginning of October, gasoline inventories had decreased by almost 30 million barrels (12%) from their relative highs on June 26, and fell lower than the five-year average during the weeks ending October 2 and October 9. However, beginning with the week ending October 16, U.S. gasoline inventories have increased at a faster-than-average rate, and as of the week ending November 20, they were 9.1 million barrels higher than the five-year average for the same period. If gasoline inventories continue to maintain higher-than-average levels, or continue to grow, they are likely to exert further downward pressure on retail pump prices. If low retail prices are sustained, they will also begin to put downward pressure on crack spreads (an estimate of refining profitability based on crude oil and product prices) and refinery margins.

Figure 3. U.S. total motor gasoline inventories

U.S. average regular gasoline price decreases, diesel price increases

The U.S. average regular gasoline retail price decreased nearly 1 cent to $2.10 per gallon on November 23, 48 cents lower than the same time last year. The Midwest price decreased more than 2 cents to $1.94 per gallon, the Rocky Mountain price decreased nearly 2 cents to $2.18 per gallon, the Gulf Coast price decreased 1 cent to $1.77 per gallon, and the East Coast price decreased less than 1 cent, remaining virtually unchanged at $2.07 per gallon. The West Coast price was unchanged at $2.77 per gallon.

The U.S. average diesel fuel price increased more than 2 cents to $2.46 per gallon on November 23, 60 cents lower than a year ago. The Gulf Coast price increased 3 cents to $2.21 per gallon, the Rocky Mountain price increased nearly 3 cents to $2.52 per gallon, the Midwest price increased 2 cents to $2.36 per gallon, and the East Coast and West Coast prices each increased nearly 2 cents to $2.51 per gallon and $3.01 per gallon, respectively.

Propane/propylene inventories decline

U.S. propane/propylene stocks decreased by 0.3 million barrels last week to 92.6 million barrels as of November 20, 2020, 5.5 million barrels (6.4%) greater than the five-year (2015-19) average inventory levels for this same time of year. Midwest, Gulf Coast, and Rocky Mountain/West Coast inventories decreased by 0.5 million barrels, 0.4 million barrels, and 0.3 million barrels, respectively. East Coast inventories increased by 0.9 million barrels.

Residential heating fuel prices increase

As of November 23, 2020, residential heating oil prices averaged nearly $2.21 per gallon, more than 3 cents per gallon above last week’s price but almost 79 cents per gallon lower than last year’s price at this time. Wholesale heating oil prices averaged nearly $1.39 per gallon, almost 8 cents per gallon above last week’s price but nearly 66 cents per gallon lower than last year.

Residential propane prices averaged $1.85 per gallon, less than 1 cent per gallon above last week’s price but almost 15 cents per gallon below last year’s price. Wholesale propane prices averaged more than $0.65 per gallon, more than 5 cents per gallon below last week’s price and nearly 25 cents per gallon below last year’s price.

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

Tags: consumption/demand , gasoline , liquid fuels , oil/petroleum

Retail prices (dollars per gallon)

Retail price graphs
  Retail prices Change from last
  11/23/20 Week Year
Gasoline 2.102 -0.009 -0.477
Diesel 2.462 0.021 -0.604
Heating Oil 2.208 0.031 -0.786
Propane 1.850 0.002 -0.149

Futures prices (dollars per gallon*)

Futures price graphs
  Futures prices Change from last
  11/20/20 Week Year
Crude oil 42.15 2.02 -15.62
Gasoline 1.175 0.050 -0.499
Heating oil 1.286 0.082 -0.643
*Note: Crude oil price in dollars per barrel.

Stocks (million barrels)

Stock price graphs
  Stocks Change from last
  11/20/20 Week Year
Crude oil 488.7 -0.8 36.8
Gasoline 230.1 2.2 4.2
Distillate 142.6 -1.4 26.2
Propane 92.562 -0.325 4.241