Released on November 21, 2007
(Next Release on November 28, 2007)

Over the River and Through the Woods
As the classic holiday song goes, many Americans will be heading to grandmother’s house or elsewhere tomorrow to share Thanksgiving dinner. However, since very few people will be traveling by horse-drawn sleigh this year, prospective holiday travelers are more likely to be eyeing gasoline prices and wondering just how dear this annual trip will be.

American Automobile Association (AAA) is predicting that 38.7 million Americans will travel 50 miles or more during Thanksgiving week, and for over 80 percent of those trips, the automobile will be the primary mode of transportation. Motorists will be facing higher gasoline prices than during any Thanksgiving week in the past, with the U.S. average retail price for regular gasoline currently standing about 86 cents per gallon higher than last year, the previous record nominal price for Thanksgiving week.

The rise in gasoline prices can be almost entirely ascribed to increases in the price of crude oil seen in recent weeks. It takes approximately 3 to 6 weeks for price changes in the crude oil market to completely filter through to prices at the retail pump. If we compare the average crude oil price for the last three weeks to the average crude oil price for the same three weeks in 2006, the price difference is about 85 cents per gallon, which closely matches the year-on-year increase we are seeing in retail gasoline prices. The reasons behind higher oil prices were covered in This Week in Petroleum two weeks ago. This can best be summarized as producing a tight balance between supply and demand in which strong global oil demand growth combines with moderate supply growth and low spare production capacity to create an environment of low and falling global commercial inventories and little flexibility in upstream and downstream infrastructure during times of perceived relatively high potential for significant supply disruptions.

While holiday travelers will be paying more this year to eat pumpkin pie with grandma, they should realize that for a 100 mile roundtrip, in a vehicle averaging 20 miles per gallon, they will be spending less than $5 more on fuel costs this year versus last year. Nevertheless, although crude oil prices have been highly volatile so far this week, making it difficult to predict the direction of markets in coming weeks, a significant decline in gasoline prices before Christmas appears unlikely.

Residential Heating Fuel Prices Slow Their Ascent
Though price escalation was muted, residential heating oil prices reached record highs for the seventh consecutive week during the period ending November 19, 2007. The average residential heating oil price increased 0.7 cent last week to reach 321.3 cents per gallon, a gain of 83.3 cents from this time last year. Wholesale heating oil prices decreased 2.6 cents, receding to 265.2 cents per gallon, which was an increase of 89.9 cents compared to the same period last year.

Marking its seventh straight record week during this heating season, the average residential propane price gained 2.3 cents to reach 243.5 cents per gallon. This was an increase of 48.9 cents compared to the 194.6 cents per gallon average for this same time last year. Wholesale propane prices decreased 6.1 cents per gallon, from 165.5 to 159.4 cents per gallon. This was an increase of 55.3 cents from the November 13, 2006 price of 104.1 cents per gallon.

Retail Gasoline and Diesel Prices Fall Slightly
After four consecutive weeks of increases, the U.S. average retail price for regular gasoline declined 1.2 cents to 309.9 cents per gallon as of November 19, 2007, 86.0 cents above a year ago. Regional prices were mixed, with the West Coast seeing a gain of 2.4 cents to 330.3 cents per gallon, the highest regional price in the country. The average price for regular grade in California was 339.5 cents per gallon, up 2.9 cents from last week and 90.0 cents per gallon over last year. Gains were also recorded on the East Coast, which rose 0.8 cent to 308.5 cents per gallon, and in the Rocky Mountain region, where a shift of 0.4 cent increased the price to 306.8 cents per gallon. The Midwest price fell 5.7 cents to 307.0 cents per gallon while the Gulf Coast was lower by 1.2 cents to 296.9 cents per gallon, the only region under the $3 mark.

The retail diesel fuel price retreated from a record high, falling 1.5 cents to settle at 341.0 cents per gallon. Regional prices were down across the country with the East Coast decreasing 0.8 cent to 340.7 cents per gallon. The Midwest fell to 338.9 cents per gallon, 1.4 cents less than last week. The Gulf Coast dropped 2.3 cents per gallon to 332.4 cents per gallon. The Rocky Mountain price recorded the largest decrease, a fall of 2.5 cents to 350.7 cents per gallon. Still the highest regional price, the West Coast declined to 358.6 cents per gallon after lessening by 2.2 cents. California prices eased 3.9 cents to slip to 362.4 cents per gallon.

Colder Weather Contributes to Lower Propane Inventories
Chilly temperatures in the Northeast and Midwest contributed to lower propane inventories by 0.4 million barrels last week, sending inventories down to an estimated 61.2 million barrels as of November 16, 2007. Regional activity showed inventories mixed last week, with sizable drops in the East Coast and Midwest of 0.4 million barrels and 0.5 million barrels, respectively. However, strong imports into the Gulf Coast pushed the region’s inventories up 0.5 million barrels, while inventories in the combined Rocky Mountain/West Coast region remained relatively unchanged during this same time. Propylene non-fuel use inventories fell by 0.2 million barrels last week, lowering the share of this product to 2.9 percent from the prior week’s 3.3 percent share.

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