Released on September 14, 2005
(Next Release on September 21, 2005)

What Goes Up Will Come Down
After increasing by 45 cents per gallon between August 29 and September 5 following the devastation caused by Hurricane Katrina, the average U.S. retail gasoline price fell by more than 11 cents between September 5 and 12. This reflected the beginning of the restoration of the gasoline supply chain, as refineries slowly began to return to operation and key pipelines began to see gasoline flow more freely than before. However, while the situation may be improving, the supply system is still a long way from being back to normal.

The data released today for last week clearly shows a gasoline system moving back toward equilibrium. Even with a slight increase in refinery throughput (many refineries only began to get restarted late last week), gasoline production increased dramatically, rising by more than 400,000 barrels per day. This clearly reflects refiners and blenders attempting to maximize gasoline production, which makes economic sense, given high wholesale prices. In addition, total gasoline imports (including blending components), averaged 1.1 million barrels per day, an increase of 236,000 barrels per day over the previous week, and about 300,000 barrels per day more than typically seen in early September. With high prices encouraging incremental supplies to the United States, and pledges of increased exports to the United States from strategic stockpiles of countries belonging to the International Energy Agency, gasoline imports should remain elevated over the next few weeks. Increased supply will put downward pressure on prices. EIA expects retail prices to continue dropping over the remainder of the month and possibly longer. However, the U.S. gasoline supply situation remains far from normal, and prices generally remain above pre-Hurricane Katrina levels. With as much as 5 percent of refinery capacity expected to remain shut down for months, it will take time for the gasoline supply system to return to normal, implying that prices could remain elevated (the U.S. average retail price was $2.61 per gallon on August 29) for some time to come. With significant volumes of refinery capacity expected to remain out for an extended period, consumers should not expect prices to decline quickly, since the disruption to supply is still occurring.

For the latest information on how oil infrastructure is being impacted in the aftermath of Hurricane Katrina, see EIA’s Daily Report and more detailed reports from the Office of Electricity Delivery & Energy Reliability.

U.S. Average Retail Gasoline Falls Below $3 per Gallon
The U.S. average retail price for regular gasoline decreased by 11.4 cents to 295.5 cents per gallon, the largest one-week price decrease ever recorded on EIA’s weekly price survey. However, this is still 110.9 cents higher than this time last year. Prices were down throughout the country, with areas east of the Rockies, which had seen the largest increases the previous week, seeing the largest declines this past week. The Midwest and the East Coast regions saw the largest price declines, with prices falling 14.6 cents and 14.0 cents per gallon, respectively. The region with the highest price remained the Central Atlantic region (Delaware, District of Columbia, Maryland, New Jersey, New York, and Pennsylvania) which averaged 317.4 cents per gallon. Comparatively speaking, prices in the Rocky Mountain region and the West Coast declined the least, as these regions had seen much smaller increases the week before. The West Coast averaged 299.7 cents per gallon, with the average price in California at 300.4 cents per gallon.

Retail diesel fuel prices also dropped significantly, falling 5.1 cents to reach 284.7 cents per gallon. Prices were down across the country, with the Midwest region seeing the largest regional decrease of 6.1 cents to average 278.2 cents per gallon, making it also the cheapest region in the country. The West Coast had the highest regional price, averaging 309.3 cents per gallon, while California prices averaged 315.8 cents per gallon, despite a drop of 9.2 cents per gallon. The Midwest saw a gain of 31.1 cents to 284.3 cents per gallon.

Propane Inventories Decline
Once again, U.S. inventories of propane decreased last week by 0.6 million barrels, moving inventories to an estimated 64.2 million barrels as of September 9, 2005.  Inventories fell in the Gulf Coast and Rocky Mountain/West Coast regions by 0.5 and 0.4 million barrels, respectfully.  East Coast inventories rose by 0.2 million barrels while the Midwest region had no change.  Propylene non-fuel use inventories fell by 0.1 million barrels last week to 4.4 million barrels, a level that accounted for 6.9 percent of total propane/propylene inventories.

Text from the previous editions of “This Week In Petroleum” is now accessible through a link at the top right-hand corner of this page.