Released on November 26, 2003
(Next Release on December 3, 2003)

How Low Are RFG Inventories?
Analysts who closely follow the U. S. gasoline market are noticing a significant declining trend in finished reformulated gasoline (RFG) inventories over the last several weeks. Although they increased last week, they are still down significantly since October 17. Over the last 5 weeks, RFG inventories (stocks) have declined by 5.8 million barrels, with stocks on the East Coast and West Coast down 3.0 and 2.0 million barrels, respectively. Are we losing RFG inventories? Not as much as it may appear. Some of this trend (minus the usual seasonal patterns normally expected) has been due to the way data are recorded when regions switch from the use of ethers (notably MTBE) to alcohols (ethanol) as a major component for oxygenating gasoline.

When making MTBE-blended RFG, refiners produce motor gasoline blending components from refinery crude oil distillation and downstream processing units. These components are then typically blended with MTBE (or another ether) to increase the oxygen level and add octane, producing a finished gasoline that is shipped by pipeline to a terminal. Hence, the product shows up as finished gasoline stocks at the refinery, pipeline, and terminal as it makes its way through the distribution system. At the terminal rack, tanker trucks receive the finished gasoline along with special additives (detergents, etc.) specific to a particular gasoline retailer and deliver the RFG to retail stations.

Now, in areas that have phased out MTBE and are using ethanol, the production of finished RFG has shifted from the refinery to the terminal. Refiners do not move ethanol-based finished gasoline via pipeline because ethanol has an affinity for water, and since pipelines and tanks frequently contain some water, ethanol can get pulled out of the gasoline, leaving a product that cannot be used. As a result, RFG refiners that shift from using MTBE to ethanol now store and ship a base unfinished gasoline mixture called reformulated gasoline blendstock for oxygenate blending, or RBOB. The RBOB is not made into finished gasoline until it is blended with ethanol at the terminal rack. RBOB does not show up in EIA data as finished gasoline inventories, but is accounted for under gasoline blending components.

The immediate result of this change is that RFG stocks data decline and blending component stocks data increase in regions that are switching from using MTBE to ethanol in their RFG. Starting in 2004, EIA will begin collecting and publishing an expanded series on blending components. We will begin to break out RBOB inventories as well as any unfinished conventional gasoline intended for ethanol blending. Hence, the stocks of finished RFG and RBOB can be combined to provide a measure of total RFG-quality inventories available. The earliest this data will be available is late March/early April, as monthly data collected under the new series will not be available for use until then. Meanwhile, the most consistent means of observing trends in RFG-quality gasoline inventories is to explore the sum of RFG and gasoline blending component inventories. While gasoline blending component data contain materials other than RBOB, this inventory data series with RFG will provide a better indicator of RFG-quality trends than RFG alone. Other published gasoline data elements are not affected by the switch to ethanol.

U.S. Retail Gasoline Price Increases Ahead of the Holiday
The U.S. average retail price for regular gasoline rose last week by 1.5 cents per gallon as of November 24 to reach 151.2 cents per gallon, which is 13.2 cents per gallon higher than a year ago. This rise came after several weeks of falling prices, and is mostly due to increases in crude oil prices over the first two weeks of November. Retail regular gasoline prices were up throughout most of the country last week, with the Midwest seeing the largest increase of 3.5 cents per gallon to hit 148.6 cents per gallon. California prices averaged 169.1 cents per gallon after gaining 1.0 cent this past week. The Rocky Mountains had the only PADD level price decrease, falling 0.9 cent to hit 153.3 cents per gallon.

Retail diesel fuel prices rose for the second consecutive week, increasing by 1.0 cent per gallon as of November 24 to a national average of 149.1 cents per gallon, which is 8.6 cents per gallon higher than a year ago. Retail diesel prices were up throughout the country last week, with New England seeing the largest price increase of 2.2 cents to reach 160.3 cents per gallon. The West Coast saw a price increase of 1.6 cents to hit 161.2 cents per gallon.

Residential Heating Oil and Propane Prices Continue Gradual Climb
Residential heating oil prices for the period ending November 24, 2003 saw increases once again. The average residential heating oil price was 141.1 cents per gallon, an increase of 1.1 cents from last week and 13.2 cents higher than this time last year. Wholesale heating oil prices declined to 89.5 cents per gallon, a decrease of 1.3 cents from the previous week and an increase of 5.7 cents from last year.

The average residential propane price rose 0.6 cent to 133.6 cents per gallon. This was an increase of 16.8 cents over the average for this same time last year. Wholesale propane prices increased 0.2 cent per gallon, from 63.6 to 63.8 cents per gallon. This was an increase of 8.6 cents from the November 25, 2002 price of 55.2 cents per gallon.

Weekly Propane Inventories Continue Moderately Lower
Primary stockholders of propane reported a weekly stockdraw ahead of the Thanksgiving holiday that totaled about 0.6 million barrels, leaving inventories at an estimated 64.3 million barrels as of November 21, 2003. Although last week's stockdraw was not particularly small, the draw did appear somewhat low in view of the first major snow storm of the season that swept through the Midwest last week and left many areas, including the East Coast, with very chilly temperatures. But a likely scenario is that larger stockdraws may appear over the next several weeks as residential and other propane consumers begin to replenish their tanks from the vestiges of the first bouts of winter weather. Regional inventories turned lower last week in the East Coast and Gulf Coast with respective declines measuring 0.3 million barrels and 0.7 million barrels, while the Midwest reported an unexpected stockbuild that totaled more than 0.4 million barrels during this same period. Total inventories of propylene non-fuel use continued down last week with a 0.2-million-barrel decline that put inventories at 1.7 million barrels, a level that accounted for a smaller share of total propane/propylene inventories at 2.7 percent, compared with last week's 3.0 percent share.

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