Released on April 3, 2002
(Next Release on April 10, 2002)

Crude Imports Key to Market Price Stability
Crude oil inventories pushed higher last week despite higher refinery runs due to a large increase in crude imports, albeit much of the expected increase can be attributed to delayed shipments from the previous week when severe fog conditions in the Houston Ship Channel prevented ships from docking. Crude oil imports averaged 9.1 million barrels per day, up 1.3 million barrels per day from last week, while crude oil inventories soared by 6.1 million barrels to end the week at 325.1 million barrels. Refinery runs averaged 14.7 million barrels per day during this same period, a weekly increase of nearly 0.2 million barrels per day.

The level of crude oil imports to supply increasingly higher refinery output of petroleum products, particularly gasoline, has become a major concern over the past several weeks. In order to stave off a repeat of last year’s steep run up in motor gasoline prices, crude oil supplies will need to be maintained at a rate that keeps up with anticipated strong demand for gasoline and other petroleum products as the U.S. economy recovers from its recent downturn. Fueling some of the concern was the Commerce Department second upward revision to the level of growth in the U.S. economy (measured as Gross Domestic Product or GDP) during the fourth quarter 2001 to 1.7 percent from 1.4 percent. Many analysts believe even stronger growth is ahead for the U.S. economy during the first half of 2002, putting further upward pressure on petroleum product prices.

Although crude oil imports reported a gain last week, the average over the last four weeks continued to be more than 1 million barrels below the same level last year. At the same time refinery runs moved higher for the third consecutive week. Motorists are not the only consumers agonizing over rising fuel costs; truckers are worried that rising diesel prices, which have increased 14.1 cents per gallon over the past five weeks, could moderate the economic recovery and significantly add to their already high operating costs. If the discrepancy between crude imports and refinery runs continues to widen as the summer driving season nears, both crude and product stocks are expected to drop sharply, pressuring up further gasoline and other petroleum product prices.

Retail Gasoline Prices Continue a Five-Week Upward Trend
EIA’s latest weekly gasoline price survey, released on April 1, showed the average retail price for regular gasoline increasing 2.9 cents per gallon to 137.1 cents per gallon. This was the highest price since October 1, 2001, but still 7.1 cents lower than last year’s price. The national average price for regular gasoline has risen 25.5 cents per gallon in the past 5 weeks.

Average retail prices were relatively flat through January and February, and actually declined slightly in the Midwest, but prices in California rose more than 20 cents per gallon in that period. The largest increases in average retail prices for regular gasoline in the past 5 weeks have occurred in California (28.8 cents) and in the Midwest (28.3 cents), while prices on the East Coast rose by 23.7 cents over the 5-week period. The increases appear to reflect a variety of factors, including rising crude oil prices, seasonal pressures, and declining inventories. While EIA does not forecast a return to gasoline prices as high as those seen in the last two years, the seasonal increase now underway is expected to continue over the coming weeks, with peak prices ultimately determined by the strength of both crude oil and gasoline market balances seen in late spring. While the final outcome is difficult to predict, momentum is building and surprises are not unexpected.

Retail diesel fuel prices rose by 1.4 cents per gallon last week, to a national average of 129.5 cents per gallon as of April 1. The increase in diesel fuel prices over the past 5 weeks (14.1 cents per gallon) has been lower than that for gasoline, reflecting higher inventories and a different seasonal demand pattern.

Propane Inventories Fall
U.S. inventories of propane posted a 0.7-million-barrel drop last week, just as the industry begins its transition from the winter heating season to the spring/summer build season. U.S. inventories of propane stood at an estimated 39.3 million barrels as of March 29, 2002, a level that remains more than 15 million barrels above a year ago. The mild winter contributed to a season (September - March) stock draw estimated at 27.7 million barrels, the lowest since 1997. But the 2001-02 winter heating season did not follow historical patterns because inventories continued to stockpile through November, distorting the true stock draw by 3.5 million barrels. So, if the seasonal stock draw were measured from the end of November instead of September, the draw would total about 31.2 million barrels, a level much closer to the 5-year average of 33.9 million barrels.

Regional inventories continued lower in the Midwest last week but were partially offset by increases in the rest of the U.S. Midwest inventories recorded a record stock draw during March, falling by nearly 4.6 million barrels for the month. While overall March temperatures were only slightly below normal, temperatures in Midwest areas were much colder than normal during the month.