Released on May 21, 2003
(Next Release on May 29, 2003)

A Long Trip Ahead
With Memorial Day weekend and the peak summer driving season approaching, many people are contemplating taking long trips, either by car or plane. And so too, it will be a long trip to return U.S. petroleum inventories to normal levels. To illustrate, for the week ending May 9, total commercial petroleum inventories measured 904.7 million barrels, which was 122.2 million barrels less than last year and 110.1 million barrels less than the 5-year average for that time of year. Now, as of the week ending May 16, total commercial petroleum inventories are at 912.1 million barrels, which is 118.8 million barrels less than last year and 108.7 million barrels less than the 5-year average for this time of year. Thus, although inventories gained 7.4 million barrels last week, total commercial petroleum inventories still gained just 3.4 million barrels with the comparison to last year and only 1.4 million barrels compared to the 5-year average. So, while inventories are increasing, it will continue to be months, not weeks, before inventories return to normal levels.

Gasoline Supply/Price Picture Bodes Well for Holiday Travelers
The traditional start of the summer driving season will greet holiday travelers with adequate gasoline supplies and lower prices compared with the outlook earlier this year when tensions in the Middle East and a looming war with Iraq presented a much different picture for consumers. From the week ending March 21, 2003, when total gasoline inventories hit a yearly low of 199.0 million barrels, the nation’s inventory of motor gasoline rose by more than 9 million barrels to 208.4 million barrels for the week ending May 16, a level that tracks within the average range for this period. Between the end of January and April, total gasoline inventories had trailed below the average range, as labor strikes in Venezuela and severe winter weather combined to pummel inventories of most petroleum products during the first quarter of the year. Nevertheless, while gasoline inventories are in relatively better shape than they were earlier in the year, inventories are still more than 9 million barrels below the level last year at this time. Regional gasoline inventories are somewhat mixed compared with last year, with East Coast and Midwest inventories moderately lower, while inventories in the Gulf Coast and the West Coast remain nearly flat compared with their prior-year levels.

The average price of regular gasoline nationwide is 149.8 cents per gallon as of May 19, a decline of 23.0 cents per gallon from its March 17 peak. The drop in crude oil prices since the eve of the war in Iraq is the driving force behind the fall in U.S. gasoline prices since their mid-March peak. While gasoline prices are currently 10.1 cents per gallon higher than a year ago, it does appear that gasoline prices will not broach the March peak this summer, compared with prior-year driving seasons when gasoline price peaks occurred later in the year. Moreover, the American Automobile Association (AAA) recently forecast that approximately 29.4 million Americans will drive 50 miles or more from home this Memorial Day weekend, a level only slightly higher than last year, limiting upward pressure on gasoline prices, at least over the holiday weekend. And with rain and cold weather expected over much of the East Coast this coming weekend, travel may even be less than the AAA forecast.

U.S. Retail Gasoline Prices Gain for the First Time in Nine Weeks
The U.S. average retail price for regular gasoline rose last week after eight weeks of falling prices. Prices increased by 0.7 cent per gallon as of May 19 to reach 149.8 cents per gallon, which is 10.1 cents per gallon higher than a year ago. Over the previous eight weeks, the average price for regular gasoline had declined by 23.7 cents per gallon. This price increase may reflect recent increases in crude oil prices. However, prices were down throughout the nation last week except for in the Midwest, which saw a significant increase of 6.2 cents to 147.5 cents per gallon and thus drove the national average price higher. The region with the lowest price is the Gulf Coast, where prices for regular gasoline averaged 136.9 cents per gallon, while the region with the highest price is the West Coast, where prices for regular gasoline averaged 173.5 cents per gallon on May 19. California prices continued to drop, decreasing by 5.8 cents to 180.9 cents per gallon, and are now 33.6 cents per gallon lower than the peak price reached on March 17.

Retail diesel fuel prices decreased for the tenth consecutive week, falling 0.1 cent per gallon as of May 19 to a national average of 144.3 cents per gallon, which is still 13.4 cents per gallon higher than a year ago. Diesel fuel prices continue to fall as market conditions improve, although the latest increase in crude oil prices may cause prices to increase some in the near future. Retail diesel prices were mixed throughout the nation last week, with the Midwest and Gulf Coast increasing by about a penny. The region with the lowest price is the Gulf Coast, where prices for diesel averaged 137.5 cents per gallon, while the region with the highest price is the Central Atlantic, where prices averaged 159.0 cents per gallon on May 19.

Crude Oil Imports from Iraq All But Dry Up
Although the origins of weekly crude oil imports are preliminary and thus not published, it appears that only one small shipment of Iraqi crude oil arrived during the week ending May 16. This is likely to be the last Iraqi crude oil imported to the United States until at least a month following the resumption of Iraqi oil exports. At the time of this report, it is still very unclear when Iraqi oil exports will resume. However, crude oil imports still averaged above 10 million barrels per day during the week ending May 16, even with hardly any Iraqi imports, mainly due to very large volumes arriving from Saudi Arabia. While imports from Saudi Arabia since the end of March do appear (looking at weekly data) to have increased some from the amount imported earlier in the year, the amount imported last week from Saudi Arabia appear to exceed the large volumes imported in recent weeks. With Iraqi crude oil imports likely out of the picture for a while, increased imports from other countries, such as Saudi Arabia, will be needed to maintain imports at the 10 million barrels per day level that will probably be required to keep inventories increasing. However, as stated above, even with crude oil imports averaging 10 million barrels per day, it will likely take months, not weeks, to return inventories to normal levels.

May Propane Stockbuild On Target
Last week’s 2.1-million-barrel stockbuild, coupled with the prior week’s robust 3.2-million-barrel stockbuild, put on target U.S. inventories of propane reaching or even exceeding the most recent 5-year average May build of 9.3 million barrels. The stockbuild so far this month has totaled about 57 percent of the average build expected in May, with inventories reaching an estimated 28.9 million barrels, a level that still tracks below the average range for this period. But with the expectation of strong imports during the remainder of May and June, the potential for U.S. inventories of propane moving back within the average range during this period is significant. The Gulf Coast continues to lead the nation in weekly stockbuilds with a 1.5-million-barrel gain, followed with the Midwest, which added nearly 0.5 million barrels. The East Coast, the only area that continues to report inventories above the average range for this time of year, remained essentially flat last week. Inventories of propylene for non-fuel use edged higher last week to 1.7 million barrels, a level that accounts for 6.0 percent of total propane/propylene inventories.

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