Released on March 13, 2002
(Next Release on March 20, 2002)

March Madness
As another March unfolds, retail gasoline prices have begun their now familiar rise. In EIA’s latest weekly survey, released on March 11, the average U.S. retail price for regular gasoline jumped 7.9 cents to 122.3 cents per gallon, the second largest 1-week increase since EIA began this survey in 1990. Last year, prices rose nearly 4 cents per gallon in the last week of March, while 2 years ago, the first week of March showed the only weekly increase greater than this past one, a rise of 8.0 cents per gallon on March 6, 2000.

Retail gasoline prices have risen unevenly nationwide since bottoming out at 105.9 cents per gallon on December 17, 2001, the lowest price since March 1999. The strongest increases have occurred in California (up 35.4 cents since December 31) and the Midwest (up 19.7 cents since December 17, including a 7.6-cent jump this week). The increases appear to reflect a variety of factors, including rising crude oil prices, seasonal pressures, declining inventories, and refinery problems in some areas. Still, albeit momentary, the national average price remains 18.9 cents lower than a year ago, and those in California and the Midwest are 24.6 and 14.6 cents, respectively, below year-ago levels. While EIA does not forecast a return to the high spring gasoline prices seen the last two years, the potential for a stronger than normal seasonal increase is rising. Whether gasoline prices this season creep up at the pace of a Terrapin, or rise as fast as a Jayhawk, has yet to be determined. What is certain, however, is that whatever windfall consumers may have enjoyed this winter is over.

Meanwhile, retail diesel fuel prices increased as well last week, climbing 4.3 cents to a national average of 121.6 cents per gallon as of March 11, but they typically do not display the same strong seasonal pattern seen in gasoline.

U.S. Crude Oil Imports Remain Low
With the time lags associated with moving a crude oil tanker from the Persian Gulf to the United States, we had expected OPEC’s latest production cut to start affecting crude oil imports in February or March. If OPEC holds true to the form it has exhibited in the past compliance with their quotas will improve in February and March and U.S. crude oil imports could remain low through April or possibly even May. At least the first part of the theory seems to be occurring, as U.S. crude oil imports have averaged 8.1 million barrels per day over the last 4 weeks, which is significantly less than was being imported earlier this year, and down from the 8.7 million barrels per day averaged over the same period last year. If the second half of the theory holds and U.S. crude oil imports remain low through April or even May, this will intersect with the time of year when refinery inputs usually increase, thus putting a strain on crude oil inventories. Of course, with crude oil inventories at the high end of the “normal range”, there is enough available to make up for lost imports temporarily. Nevertheless, the level of crude oil imports this spring will be an important barometer of market conditions.

U.S. Commercial Petroleum Inventories Continue To Decline
Even with a slight increase in commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve), total commercial petroleum inventories fell for the sixth week in a row. Declines in gasoline (1.2 million barrels) and low-sulfur distillate fuel (3.7 million barrels) more than made up for slight increases in residual fuel (1.2 million barrels) and other petroleum products (1.4 million barrels). Although total commercial petroleum inventories still remain well above the extremely low levels a year ago, the comparison to year-ago levels continues to shrink. Gasoline inventories, unlike other major petroleum products, remain near the bottom of the “normal” range. Reformulated gasoline inventories in PADD V (West Coast) fell below 10 million barrels last week for the first time since the week ending April 6, 2001, while total gasoline inventories along the West Coast fell to the lowest level since late September. Low West Coast inventories and a rash of refinery problems probably explain the more rapid run-up in retail prices.

Gasoline Demand Remains Strong Compared to Year-Ago Levels
While total petroleum demand continues to lag behind the high levels seen a year ago, gasoline demand over the last four weeks has averaged 3.4 percent higher over the comparable period last year. While demand for most other petroleum products has remained well below the high levels seen a year ago, gasoline demand has often remained above levels seen 12 months earlier. This could be the main reason why gasoline inventories remain near the lower end of the normal range, while other major products, such as distillate fuel or propane are closer to the higher end of the normal range.

Propane and Heating Oil Markets
U.S. inventories of propane continued to drop last week as late winter weather boosted demand, pushing inventories down by 2.5 million barrels to 40.1 million barrels as of the week ending March 8, 2002. Last week’s unseasonably strong stock draw was a continuation of the late heating season drop in inventories following one of the mildest winters in recent years. In contrast, the most recent five-year average stock draw during March measured only 1.8 million barrels. The record draw for this month occurred during March 1999, when late winter weather combined with strong petrochemical feedstock demand pushed propane inventories lower by 7.4 million barrels. But, in spite of the recent surge in demand, U.S. inventories of propane continue to track above the average range for this time of year.

As wholesale prices for winter fuels continued their upward momentum, residential heating oil prices showed an upturn on March 11, as the average stood at 116.8 cents per gallon, an increase of 0.7-cent from last week’s mark, but 26.0 cents below the March 12, 2001 posting. Residential propane prices, on the other hand, did not respond to the wholesale price increases, showing a 0.4-cent decrease from last week, falling to 112.1 cents per gallon. Propane prices were 31.3 cents below last year’s posting for the same period.