Release date: September 8, 2016 | Next release date: September 14, 2016
U.S. retail gasoline prices at twelve-year low heading into Labor Day
The U.S. average retail price for regular gasoline was $2.24/gallon (gal) on August 29, the lowest price on the Monday before Labor Day since 2004 and 27 cents/gal lower than the same time last year (Figure 1). Lower crude oil prices are the main factor behind falling U.S. gasoline prices. Lower crude oil prices reflect continued high global crude oil and petroleum product inventories and increased drilling activity in the United States. Despite strong gasoline demand, high inventories and lower crude prices have been putting downward pressure on gasoline prices and refinery margins.
U.S. Federal Highway Administration data indicate that the cumulative miles driven in the United States in 2016 as of June was up 50.5 billion miles, or 3.3%, from the same time period in 2015. EIA’s product supplied data for motor gasoline, which approximates consumption, reflect a similar increase in U.S. demand for gasoline. Gasoline consumption in the first half of 2016 averaged 9.3 million barrels per day (b/d), an increase of 2.5% compared with the same period last year.
In 2015, annual U.S. gasoline consumption rose 240,000 b/d to 9.16 million b/d. Consumption is expected to increase an additional 171,000 b/d to 9.33 million b/d in 2016, surpassing the previous high of 9.29 million b/d set in 2007. EIA currently projects that gasoline consumption will remain high in 2017 and will be close to 2016 levels.
Although gasoline consumption has been robust in countries such as the United States, China, and India, growth in gasoline supply has outpaced gasoline consumption since last summer. Refineries have some ability to adjust petroleum product yields by adding equipment or modifying processes and feedstocks, and refineries increased production of gasoline, compared with distillate, to take advantage of the high gasoline margins in 2015 and early 2016. The shift toward gasoline production exceeded growth in demand and resulted in high gasoline inventory levels that have remained consistently above five-year averages.
In the United States, total gasoline inventories in Petroleum Administration for Defense District (PADD) 1 (East Coast) were 14.3 million barrels higher than the five-year average level as of July 22. Since then, they have come down slightly and were 11.4 million barrels above the five year average as of August 26. The increase in gasoline inventories is a significant driver of low spreads between gasoline and crude oil prices compared with the same time last year. Gasoline crack spreads, the difference between gasoline futures prices and crude oil, remain low with the New York and Los Angeles spreads down 8 cents/gal and 39 cents/gal (19% and 52%), respectively, from the week before Labor Day last year. PADD 3 (Gulf Coast) crack spreads, however, increased nine cents (29%) compared with the same time last year. Despite the recent rise, crack spreads in 2016 have remained relatively flat since early spring and did not have a significant increase in the summer as they did in 2015.
Retail gasoline prices vary significantly within the U.S. as a result of regional supply and demand balances, gasoline specification requirements, and taxes (Figure 2). The U.S. Gulf Coast typically has the lowest retail gasoline prices in the country, because it has approximately 50% of U.S. refining capacity and produces more gasoline than it consumes. PADD 5 (West Coast) retail gasoline prices are often above the average U.S. price because of the region’s tight supply and demand balance, isolation from additional supply sources, and gasoline specifications that are more costly to manufacture. Prior to 2015, the five-year average premiums over the U.S. average retail price for regular gasoline in PADD 5 and California were 27 cents/gal and 36 cents/gal, respectively. In 2015, however, the temporary shutdown of the Torrance Refinery contributed to the PADD 5 gasoline price averaging 55 cents above the U.S. average and the California gasoline price averaging 74 cents above the U.S. average. With the Torrance Refinery online again, the PADD 5 and California premiums have decreased slightly to 46 cents/gal and 62 cents/gal, respectively.
U.S. regular gasoline prices averaged $2.23/gal from April through August. EIA expects the 2016 summer season (April through September) to average $2.19/gal, 44 cents lower than last summer. EIA expects that the monthly average price of U.S. regular gasoline in 2016 peaked in June at $2.37/gal, and anticipates lower prices in the fourth quarter of this year. U.S. regular gasoline prices are forecast to average $2.08/gal in 2016 and $2.26/gal in 2017 (Figure 3).
U.S. gasoline and diesel fuel prices decrease
The U.S. average regular gasoline retail price was $2.22 per gallon on September 5, a decrease of one cent from the previous week and down 21 cents from the same time last year. The Midwest price fell five cents to $2.18 per gallon, while the Gulf Coast price dropped less than a cent to remain at $2.01 per gallon. The West Coast, Rocky Mountain, and East Coast prices all rose by less than one cent to $2.59 per gallon, $2.27 per gallon, and $2.17 per gallon, respectively.
The U.S. average diesel fuel price dipped modestly, remaining virtually unchanged at $2.41 per gallon, down 13 cents from the same time last year. The Gulf Coast price dropped one cent to $2.26 per gallon, while the East Coast and Midwest prices each fell by less than a penny, remaining at $2.41 per gallon and $2.39 per gallon, respectively. The Rocky Mountain price increased two cents to $2.49 per gallon and the West Coast price rose one cent to $2.66 per gallon.
Propane inventories gain
U.S. propane stocks increased by 0.6 million barrels last week to 99.1 million barrels as of September 2, 2016, 2.6 million barrels (2.7%) higher than a year ago. Midwest and East Coast inventories increased by 0.4 million barrels and 0.3 million barrels, respectively, while Gulf Coast and Rocky Mountain/West Coast inventories declined modestly, remaining virtually unchanged. Propylene non-fuel-use inventories represented 2.3% of total propane inventories.
For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.
Retail prices (dollars per gallon)
| Retail prices | Change from last | ||
|---|---|---|---|
| 09/05/16 | Week | Year | |
| Gasoline | 2.223 | -0.014 | -0.214 |
| Diesel | 2.407 | -0.002 | -0.127 |
Futures prices (dollars per gallon*)
| Futures prices | Change from last | ||
|---|---|---|---|
| 09/02/16 | Week | Year | |
| Crude oil | 44.44 | -3.20 | -1.61 |
| Gasoline | 1.302 | -0.211 | -0.116 |
| Heating oil | 1.410 | -0.087 | -0.186 |
| *Note: Crude oil price in dollars per barrel. | |||
Stocks (million barrels)
| Stocks | Change from last | ||
|---|---|---|---|
| 09/02/16 | Week | Year | |
| Crude oil | 511.4 | -14.5 | 53.4 |
| Gasoline | 227.8 | -4.2 | 13.2 |
| Distillate | 158.1 | 3.4 | 7.2 |
| Propane | 99.127 | 0.617 | 2.571 |