Release date: September 2, 2020 | Next release date: September 10, 2020
Lowest U.S. average regular gasoline retail price heading into Labor Day weekend since 2004
The U.S. average regular gasoline retail price as of the Monday before Labor Day weekend is $2.22 per gallon (gal) this year, the lowest level for this time of year since 2004 (Figure 1). The Labor Day holiday is typically the end of the summer driving season, the time when gasoline demand is usually greatest during the year. Because of responses to the 2019 novel coronavirus disease (COVID-19) and efforts to mitigate its spread, however, monthly U.S. gasoline consumption (as measured by product supplied) has remained less than the previous five-year (2015-19) range since March. The low price going into Labor Day 2020 reflects continued weak gasoline demand following a summer that saw reduced commuter and recreational travel activity.
During the peak of COVID-19 induced lockdowns in April, the U.S. weekly average regular gasoline retail price fell to as low as $1.77/gal, representing a year-on-year decrease of 38.6%. The price then began increasing in early May. The average weekly U.S. retail gasoline price increased to more than $2.00/gal by early June. From June 29 through August 31, the U.S. average retail price remained relatively flat but down 18.4% from the prices at the same time last year, averaging $2.18/gal. The prices over this period have a range of 6 cents (the highest weekly price minus the lowest), the second-narrowest range when compared to the previous five years (2015-2019) and well below the 21-cent range through the same period in 2019.
Monthly motor gasoline consumption in the United States, measured as product supplied, reached a low of 5.85 million barrels per day (b/d) during April 2020, the lowest level since 1974. Efforts to slow the spread of COVID-19 were most widespread in April, when total U.S. gasoline product supplied was down by about 37% from the previous year. Gasoline demand increased to approximately 90% of levels seen last year by the end of June and have remained at about that level through the week of August 28. Despite the increase from recent lows, gasoline demand remains lower than the five year range (Figure 2).
Low gasoline demand—alongside similarly reduced demand for other petroleum products— is contributing to lower crude oil prices. Weekly Brent crude oil prices fell from $68 per barrel (b) in the beginning of January to a low of $14/b in late April. Since then, the Brent price has increased, averaging between $40.95/b the week of June 29 to $44.79/b the week of August 31. The relatively stable crude oil prices since July have contributed to flat gasoline prices as well, but the rapid changes in crude oil prices earlier in the year contributed to changes in the composition of retail gasoline prices on both a dollar and percentage basis.
Crude oil typically accounts for more than 50% of the total retail price of gasoline, as it did in January and February of 2020 as well as in all of 2019 (Figure 3). The rapid decrease in U.S. demand led to changes in the composition of the retail price of gasoline, and in April, the price of crude oil fell to a low of 25% of the total retail price of gasoline. In April, the refining component of the gasoline price fell to 2% of the retail price of gasoline, down from an average of 13% in 2019. Monthly distribution and marketing, which accounted for less than 15% of the total retail price in 2019 (or 38 cents/gal), reached 42% and 46% of the total retail price (93 cents/gal and 85 cents/gal) during March and April 2020, respectively. The shift in the composition of the price of gasoline is likely the result of:
- Falling demand due to COVID-19 mitigation efforts;
- Steep discounts by refiners in an effort to maintain space in their primary storage facilities as U.S. gasoline inventories rose to record-high levels.
The retail price composition began returning toward levels more similar to previous years in May as the refining component increased from 2% to 14% and the distribution component fell from 46% to 26%.
U.S. gasoline prices vary regionally, reflecting local supply and demand conditions, different fuel specifications required by state laws, and taxes (Figure 4). Regional gasoline prices are usually the highest in the West Coast (Petroleum Administration for Defense District, or PADD, 5), owing to the region’s limited interconnections with other major refining centers (including the Gulf Coast, PADD 3), tight local supply and demand conditions, and requirements for gasoline specifications that are more costly to manufacture. The Gulf Coast contained 53% of the country’s total refining capacity as of January 2020, and it produces more gasoline than it consumes. As a result, the price of gasoline in the Gulf Coast is often the lowest in the United States. Despite several unplanned refinery outages because of Hurricane Laura, high inventories on the Gulf Coast continued to put downward pressure on regional retail prices, which had a weekly increase of 2.3 cents as of August 31 (compared with a national increase of 4.0 cents).
On the East Coast (PADD 1), the largest gasoline demand market of the five PADDs, retail gasoline prices were relatively flat in July and August, down 18.7% from a year ago, averaging $2.10/gal. Midwest (PADD 2) prices during the same period were down 19.8% from a year ago, averaging $2.09/gal. Gasoline prices on the Gulf Coast were down 21.1% from 2019, averaging $1.86/gal. Rocky Mountain (PADD 4) prices were down 13.9% against a year ago, averaging $2.34/gal. West Coast prices were down 14.7% against a year ago, averaging $2.82/gal. Of the five regions, Rocky Mountain retail gasoline prices had the narrowest range across weekly data through the July and August period, while the West Coast had the widest range.
U.S. average regular gasoline and diesel prices increase
The U.S. average regular gasoline retail price increased 4 cents from the previous week to $2.22 per gallon on August 31, 34 cents lower than the same time last year. The East Coast price increased 6 cents to $2.16 per gallon, the Midwest price increased nearly 5 cents to $2.12 per gallon, the Gulf Coast price increased more than 2 cents to $1.89 per gallon, and the West Coast price increased less than 1 cent, remaining virtually unchanged at $2.86 per gallon. The Rocky Mountain price decreased nearly 1 cent, remaining virtually unchanged at $2.35 per gallon.
The U.S. average diesel fuel price increased nearly 2 cents from the previous week at $2.44 per gallon on August 31, 54 cents lower than a year ago. The Midwest price increased by more than 2 cents to $2.33 per gallon, the Rocky Mountain price increased nearly 2 cents to $2.39 per gallon, and the Gulf Coast, East Coast, and West Coast prices each increased more than 1 cent to $2.19 per gallon, $2.52 per gallon, and $2.97 per gallon, respectively.
Propane/propylene inventories rise
U.S. propane/propylene stocks increased by 4.4 million barrels last week to 95.2 million barrels as of August 28, 2020, 9.5 million barrels (11.1%) greater than the five-year (2015-19) average inventory levels for this same time of year. Gulf Coast inventories increased by 4.3 million barrels, Midwest inventories increased by 0.6 million barrels, and Rocky Mountain/West Coast inventories increased slightly, remaining virtually unchanged. East Coast inventories decreased by 0.5 million barrels.
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 | ||
|---|---|---|---|
| 08/31/20 | Week | Year | |
| Gasoline | 2.222 | 0.040 | -0.341 |
| Diesel | 2.441 | 0.015 | -0.535 |
Futures prices (dollars per gallon*)
| Futures prices | Change from last | ||
|---|---|---|---|
| 08/28/20 | Week | Year | |
| Crude oil | 42.97 | 0.63 | -12.13 |
| Gasoline | 1.316 | 0.032 | -0.297 |
| Heating oil | 1.216 | 0.008 | -0.612 |
| *Note: Crude oil price in dollars per barrel. | |||
Stocks (million barrels)
| Stocks | Change from last | ||
|---|---|---|---|
| 08/28/20 | Week | Year | |
| Crude oil | 498.4 | -9.4 | 75.4 |
| Gasoline | 234.9 | -4.3 | 5.3 |
| Distillate | 177.5 | -1.7 | 44.0 |
| Propane | 95.222 | 4.389 | 2.366 |