Release date: October 30, 2019 | Next release date: November 6, 2019
Retail gasoline prices in California decline from recent highs
On October 7, 2019, average California regular retail gasoline prices surpassed $4 per gallon (gal) for only the second time since 2014. The last time prices reached this level was in May 2019 as a result of planned and unplanned refinery outages in California. Crude oil prices are generally the primary driver of gasoline prices. However, California’s petroleum markets are isolated from the rest of the United States because of its lack of petroleum infrastructure connections to the rest of the country, so unplanned refinery outages in the state can have larger price impacts there than in other areas of the country. Planned refinery outages do not typically drive large price increases because refineries prepare ahead of outages to ensure adequate inventories and alternative sources of supplies are available. They do, however, place additional pressure on gasoline supply in a state with limited supply options. In addition, California requires a different gasoline specification than the rest of the country, further narrowing supply options.
The spike in crude oil prices following the September attacks in Saudi Arabia led to a small U.S. average gasoline price increase, which lasted only a short while as crude oil prices fell to pre-disruption level. This increase was followed by several unplanned refinery outages in California that further raised prices in the state even though average U.S. gasoline prices declined (Figure 1). On October 28, the average retail price for regular gasoline in California was $3.95/gal, the first week prices fell below $4/gal since September 30.
On October 14, the California price premium compared with the U.S. average retail gasoline price reached $1.46/gal, the highest since at least May 2000, when the U.S. Energy Information Administration (EIA) began collecting California gasoline price data. The California Energy Commission recently released a report explaining the causes of the gasoline price differential between California and the U.S. average. On September 30, 2019, California gasoline price premium reached $1.31/gal, surpassing those seen during the Torrance refinery outage in 2015 ($1.10/gal) and the refinery outages that occurred earlier in 2019 ($1.11/gal). The Torrance refinery outage lasted more than one year, contributing to multiple price spikes relative to the U.S. average. However, the refinery outages earlier this year were concentrated over a nine-week period when refinery runs fell lower than the five-year (2014–18) average. The recent price spike appears to be more similar to the price spike earlier in 2019, and the price premium for gasoline in California declined to $1.35/gal on October 28 as refiners resume normal operations and as gasoline supply increases.
Attacks on petroleum infrastructure in Saudi Arabia briefly caused crude oil prices to spike and likely drove price increases of 22 cents/gal in Los Angeles and 27 cents/gal in San Francisco from September 13 (before the attack on Saudi Arabia) to September 16 (the first trading day after the attack). In addition to the crude oil price spike, several refineries in California went down for planned and unplanned maintenance near the time of the attacks. For the week ending September 27, West Coast refinery utilization fell from 95% at the beginning of the month to 78%, and gross inputs into West Coast refineries fell from 2.7 million barrels per day (b/d) at the beginning of the month to 2.2 million b/d, the largest decline over a three-week period since at least 1995 (Figure 2). Gross refinery inputs were higher during the next several weeks, averaging 2.5 million b/d from the week ending October 4 to the week ending October 25.
The sharp decline in gross refinery inputs in September contributed to sharp declines in West Coast gasoline inventories. As gross refinery inputs fell from September 6 to September 27, West Coast gasoline inventories fell 1.8 million barrels to 27.0 million barrels (Figure 3). As refineries resumed operation, inventories continued to decline, falling to 26.2 million barrels on October 11, 2.2 million barrels lower than the previous five-year average, before increasing to 26.4 million barrels on October 25.
The West Coast’s isolation from other key U.S. refining areas and its more stringent gasoline specifications mean that after drawing down local inventories, the West Coast market relies on gasoline imports from refineries in Asia or Europe. In May 2019, when numerous refinery outages occurred in California, retail gasoline prices reached more than $4/gal. Weekly imports of gasoline into the West Coast reached a four-week moving average of 202,000 b/d the week of May 24, compared with an annual average of 23,000 b/d in 2018. Similarly, West Coast gasoline imports are increasing and reached 191,000 b/d the week of October 25, while the four-week moving average reached 70,000 b/d. The increased supply of gasoline will likely put downward pressure on gasoline prices.
If gasoline supply increases as a result of higher refinery runs and imports, gasoline prices will likely fall, which is similar to what happened in May 2019 when West Coast refinery inputs and gasoline imports increased. Wholesale gasoline prices in California have declined, and the weekly price for Los Angeles California reformulated blendstock for oxygenate blending (CARBOB), the California-specific gasoline specification, fell to $2.01/gal on October 28, down from $2.82/gal on September 30. However, the wholesale price for CARBOB decreased more rapidly than retail prices earlier in 2019, and retail prices in California may decline slowly as they did after the earlier price spikes this year (Figure 4).
U.S. average regular gasoline price falls, diesel price increases
The U.S. average regular gasoline retail price fell over 4 cents from the previous week to $2.60 per gallon on October 28, 22 cents lower than the same time last year. The Midwest price fell nearly 7 cents to $2.41 per gallon, the West Coast price fell nearly 5 cents to $3.60 per gallon, the Gulf Coast price fell over 3 cents to $2.25 per gallon, and the East Coast price fell nearly 3 cents to $2.45 per gallon. The Rocky Mountain price increased nearly 1 cent to $2.74 per gallon.
The U.S. average diesel fuel price increased more than 1 cent to $3.06 per gallon on October 28, 29 cents lower than a year ago. The West Coast price increased nearly 5 cents to $3.72 per gallon, the Rocky Mountain price increased nearly 4 cents to $3.08 per gallon, the East Coast price increased over 1 cent to $3.06 per gallon, the Midwest price increased nearly 1 cent, remaining at $2.96 per gallon, and the Gulf Coast price increased less than 1 cent to $2.81 per gallon.
Propane/propylene inventories decline slightly
U.S. propane/propylene stocks decreased by 0.1 million barrels last week to 99.8 million barrels as of October 25, 2019, 11.1 million barrels (12.5%) greater than the five-year (2014-18) average inventory levels for this same time of year. Rocky Mountain/West Coast inventories decreased by 0.3 million barrels, Midwest inventories decreased by 0.2 million barrels, and East Coast inventories decreased slightly, remaining virtually unchanged. Gulf Coast inventories increased by 0.4 million barrels. Propylene non-fuel-use inventories represented 5.0% of total propane/propylene inventories.
Residential heating fuel prices increase
As of October 28, 2019, residential heating oil prices averaged $2.97 per gallon, almost 1 cent per gallon above last week’s price but nearly 40 cents per gallon below last year’s price at this time. Wholesale heating oil prices averaged $2.08 per gallon, 3 cents per gallon more than last week’s price but almost 32 cents per gallon less than a year ago.
Residential propane prices averaged $1.85 per gallon, more than 1 cent per gallon higher than last week’s price but almost 57 cents per gallon lower than a year ago. Wholesale propane prices averaged nearly $0.61 per gallon, nearly 1 cent higher than last week’s price but more than 32 cents per gallon below last year’s price.
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 | ||
|---|---|---|---|
| 10/28/19 | Week | Year | |
| Gasoline | 2.596 | -0.042 | -0.215 |
| Diesel | 3.064 | 0.014 | -0.291 |
| Heating Oil | 2.973 | 0.007 | -0.399 |
| Propane | 1.853 | 0.014 | -0.565 |
Futures prices (dollars per gallon*)
| Futures prices | Change from last | ||
|---|---|---|---|
| 10/25/19 | Week | Year | |
| Crude oil | 56.66 | 2.88 | -10.93 |
| Gasoline | 1.673 | 0.050 | -0.142 |
| Heating oil | 1.980 | 0.033 | -0.323 |
| *Note: Crude oil price in dollars per barrel. | |||
Stocks (million barrels)
| Stocks | Change from last | ||
|---|---|---|---|
| 10/25/19 | Week | Year | |
| Crude oil | 438.9 | 5.7 | 12.8 |
| Gasoline | 220.1 | -3.0 | -6.1 |
| Distillate | 119.8 | -1.0 | -6.6 |
| Propane | 99.848 | -0.137 | 16.832 |