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Released on October 23, 2002
(Next Release on October 30, 2002)
Gasoline Prices Spring Forward as the Clock Falls Back
As most of the country prepares to turn their clocks back one hour this coming Saturday night
(Spring forward, Fall back) reverting to Standard Time, gasoline prices are
uncharacteristically high for this time of year. According to EIA’s
weekly gasoline price survey,
the average price for regular gasoline in the United States has increased 6.3 cents per
gallon over the last four weeks. While an increase of this magnitude is hardly
earth-shattering, it occurs at a time of year when gasoline prices are typically falling,
and follows a spring and summer that were remarkable for how stable gasoline prices were.
(See TWIP Sept. 11, 2002
for more detail on why gasoline prices were so stable this spring and summer.)
So, what’s different this year? Well, first, as crude oil prices generally rose throughout the summer,
retail gasoline prices didn’t reflect these crude oil price increases, as additional gasoline supply from both refinery production and imports kept U.S. gasoline markets flush with supply, and essentially capped prices at roughly the $1.40 per gallon national average we saw from early April to late September. But as refiners, plagued with low refinery margins all summer, began their fall maintenance and started to shift their focus away from gasoline and towards the distillate fuel market, gasoline imports and production fell back, even as gasoline demand remained historically strong for this time of year. For example, gasoline demand this September averaged an estimated 8.8 million barrels per day, while so far in October, it has averaged about 8.9 million barrels per day. While these levels are down from peak-season levels seen this summer, gasoline supply has fallen even more, leading to gasoline inventories building in September by only 1.2 million barrels, much less than the typical build of 5.5 million barrels, while through October 18, gasoline inventories have dropped by more than 11 million barrels so far in October! As a result, while gasoline inventories were at the upper end of the normal range as recently as three weeks ago, they are now at the lower end of the normal range. Of course, some of the recent gasoline inventory draw is related to refinery shutdowns due to Tropical Storm Isidore, and especially, Hurricane Lili, but the result is the same. Gasoline prices are now rising, as they begin to not only reflect some of the crude oil price increases we saw this summer, but also a tightening gasoline market.
Will gasoline prices continue to spring forward in coming weeks? Although this is difficult to predict with certainty, it does appear that gasoline prices may continue to increase. Although spot gasoline prices (essentially the wholesale price of gasoline) have fallen some in the last couple of days, up until that point it appeared that there was more room for gasoline prices to increase over the next few weeks. So it is conceivable that gasoline prices could continue to increase. Dating back to the beginning of EIA’s weekly gasoline price survey which started in August 1990, gasoline prices have never been this high (in nominal or current dollars) at this time of year except for in 2000, when the price for West Texas Intermediate crude oil averaged $34 per barrel during the months of September, October, and November. The highest recorded weekly retail price in EIA’s survey during the month of November was set on November 6, 2000 at $1.526 per gallon, while the record for the month of December was set on December 4, 2000 at $1.486 per gallon. Whether these records are in jeopardy is anyone’s guess. But what is clear is that this year, gasoline prices are not keeping pace with the changing of clocks and springing forward in the Spring and falling back in the Fall, but are instead increasing now.
Retail Gasoline and Diesel Fuel Prices Highest Since September 2001
More specifically, the U.S. average retail price for regular gasoline increased over the last week, rising by 1.8 cents per gallon as of October 21 to end at 145.8 cents per gallon, the highest since September 24, 2001. This price is 19.3 cents per gallon higher than last year.
Retail diesel fuel prices increased for the tenth week in a row, rising by 0.8 cent per gallon to a national average of 146.9 cents per gallon as of October 21. This is also the highest price since September 24, 2001. U.S. diesel fuel prices have risen 16.6 cents per gallon since they started increasing ten weeks ago, and with distillate fuel stocks remaining well under 130 million barrels, it is unlikely that prices will decrease as the holiday shopping season approaches. Retail diesel prices were up throughout most of the country, with the largest price increase occurring in the Midwest, which saw the price rise by 1.2 cents per gallon to end at 147.1 cents per gallon. Prices on the West Coast fell by 0.1 cent per gallon to end at 152.6 cents per gallon.
Retail Heating Oil and Propane Prices Increase Slightly
Residential heating oil and propane prices showed slight increases for the period ending October 21, 2002. The average residential heating oil price stood at 127.1 cents per gallon, up 0.7 cent, while the average residential propane prices increased from 113.1 to 113.5, up 0.4 cent. Heating oil prices are 3.1 cents per gallon higher than last year at this time while residential propane prices are the same as one year ago. Wholesale heating oil prices increased 1.0 cent, to 87.1 cents per gallon. Wholesale propane prices rose from 52.7 cents to 54.0 cents per gallon, up 1.3 cents.
Propane Inventories Respond to Chilly Weather
Chilly weather in the upper Midwest and East Coast last week combined with forecasts for more of the same for next week to apparently spur propane marketers to begin moving more propane out of primary storage to secondary (propane dealers) and tertiary (residential and commercial customers) storage. As such, U.S. propane inventories moved lower unexpectedly, by 1.9 million barrels, to end the week of October 18, 2002 at 67.8 million barrels. Combined with the prior week’s stock draw, U.S. inventories of propane are down more than 3.3 million barrels since the start of the heating season on October 1. Although stock draws of this magnitude this early in the heating season are rare, they are not unprecedented compared with past winters. Since 1985, October stock draws exceeding 5 million barrels occurred 4 times, while during this same period stock builds occurred 4 times, including last year’s stock build that measured 1.2 million barrels. However, despite the early season stock draws, U.S. inventories still maintain a reasonable cushion for this time of year that shows inventories tracking well within the average range.
Regional inventories fell within normal constraints last week with East Coast inventories lower by 0.1 million barrels while Midwest and Gulf Coast inventories posted progressively larger declines of 0.6 million barrels and 1.1 million barrels, respectively. While East Coast and Gulf Coast regions report inventories above their respective average ranges for this time of year, the Midwest region continues to show inventories tracking near the lower limit of the average range. But with nearly 25 million barrels in storage, any concerns about low Midwest inventories this early in the heating season may be premature since ample time remains for propane movements into the region.
Note: Texts from previous editions of “This Week In Petroleum” are now accessible through a link at the top right-hand corner of this page.
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