Released on June 21, 2006
(Next Release on June 28, 2006)

Gasoline Demand This Summer
While most people in the United States consider that summer begins on Memorial Day, the season officially begins with the summer solstice, which occurred earlier this morning. And for oil markets, it is hard to think about summer without thinking about gasoline demand. Gasoline demand peaks during the summer, as many travelers take to the roads for vacations and weekend jaunts to the beach, lake, or mountains. But many analysts are wondering if high gasoline prices are having a significant effect on driving, and pondering what that might mean for gasoline demand this summer. Depending on which data series they are looking at, they might come to different conclusions!

Users of This Week In Petroleum (TWIP) who go to the “Gasoline” page will note that gasoline demand over the four weeks ending June 16, 2006 is down 0.3 percent compared to the four weeks ending June 17, 2005. This is because this table compares this year’s weekly data to the closest comparable published weekly data from last year. However, in Table 1 of the Weekly Petroleum Status Report (WPSR), the publication in which the weekly data is released, EIA compares data for the latest four weeks to a comparable period last year using monthly data from the Petroleum Supply Monthly (PSM) weighted to account for the same 28 days last year as the latest four weeks’ worth of data for this year. This comparison shows that for the four weeks ending June 16, 2006, gasoline demand is up 0.9 percent compared to the four weeks ending June 16, 2005. So is recent gasoline demand up or down this year?

As the graph below shows, monthly gasoline demand data from January 2005 through July 2005 (2005 PSM) was consistently lower than the estimated level of monthly demand derived directly from the weekly data, which EIA analysts refer to as “monthly from weekly” (2005 MFW). Thus, comparisons of current weekly data to the 2005 monthly data show a more positive (or less negative) rate of growth than comparisons of current weekly data to 2005 weekly data. Although comparing weekly data to weekly data has the advantage of comparing “apples to apples,” the monthly data are considered to be more accurate, due to the wider coverage of the data and the longer time allowed for reporting and processing the monthly data. For this reason, EIA typically focuses on the latter comparison, which is shown in Table 1 of the WPSR. However, the TWIP tables, which focus exclusively on weekly developments, compare data for the current week to its year-ago counterpart. Some analysts favor this alternative comparison, based on their belief that changes from the weekly data to the monthly data are fairly consistent, implying that if weekly data were higher than the monthly data last year, a similar relationship would hold true this year. However, that is not necessarily the case. For example, while the 2005 March PSM data came in below the 2005 March MFW data, the reverse was true in March 2006 (as can be seen by the black triangle being slightly higher than the red square).

So, what does EIA believe is happening to gasoline demand this year and what is expected for the rest of this summer? First, looking at the most accurate available gasoline data for both 2005 and 2006, the PSM data for January through March, it can be seen that in January 2006 demand was down slightly from 2005, but in February and March it was up. Based on factors that typically affect gasoline demand (e.g., retail prices, vehicle miles traveled, Gross Domestic Product growth, personal disposable income, etc.), it appears that gasoline demand might be growing at around 0.5 percent to 1.0 percent currently, relative to the more typical historical growth rate of 1.5 percent to 2.0 percent. This is consistent with the comparison between the weekly data and last year’s monthly data. These same factors are another reason why EIA is forecasting modest gasoline demand growth through the rest of this summer as well. Whether this occurs or not remains to be seen. But on this first day of summer, EIA is expecting gasoline demand to grow from last year’s levels, albeit by a smaller amount than we would typically expect.

U.S. Average Retail Gasoline Prices Fall 3.5 Cents
The U.S. average retail price for regular gasoline decreased by 3.5 cents last week to 287.1 cents per gallon as of June 19, which is 71.0 cents higher than last year. Prices fell for the first time in three weeks, with all regions in the United States seeing price decreases. The Midwest saw the largest price decrease of 5.4 cents to 277.6 cents per gallon. West Coast prices remained the highest in the nation, falling 2.7 cents to 313.1 cents per gallon, while California prices fell 3.1 cents to 319.8 cents per gallon. East Coast prices dropped 2.8 cents to 287.3 cents per gallon.

Retail diesel fuel prices fell 0.3 cent to reach 291.5 cents per gallon as of June 19, which is 60.2 cents higher than last year. Prices were down throughout most of the country, with the Gulf Coast seeing the only PADD-level increase of 1.1 cents to 285.9 cents per gallon. West Coast prices remained the highest in the country, falling 3.2 cents to 311.7 cents per gallon, while California prices also fell 3.2 cent to 318.5 cents per gallon. East Coast prices fell 0.2 cent to 290.7 cents per gallon.

Weekly Propane Build Posts Solid Gains
Propane stockholders added a robust 2.3 million barrels to U.S. propane inventories last week, moving the nation’s supply of propane up to an estimated 44.8 million barrels as of June 16, 2006. But the recent spurt in inventory building continued to fall short of moving inventories closer to prior year levels, with inventories remaining about 2.2 million barrels below the June 17, 2005 reported level. Gulf Coast inventories, the only major region that remains below prior-year levels, posted a weekly gain of 1.1 million barrels, while the East Coast and Midwest regions added similar gains of 0.5 million barrels during this same time. The combined Rocky Mountain/West Coast regions moved higher by 0.2 million barrels last week. Propylene non-fuel use inventories gained 0.1 million barrels to account for a slightly smaller 7.1 percent share of total propane-propylene inventories compared with the prior week’s 7.3 percent share.

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