Real gasoline prices this Thanksgiving relatively unchanged from 2021

After adjusting for inflation, U.S. average regular gasoline retail prices averaged $3.65 per gallon (gal) on the Monday before Thanksgiving, a nominal increase from 2021 prices but relatively unchanged when accounting for inflation (Figure 1). In nominal dollars, the average retail price was $0.25/gal (7.5%) higher than the Monday before Thanksgiving in 2021, an increase that is almost identical to the 8% annual inflation rate, based on the U.S. Consumer Price Index (CPI). Since briefly peaking at more than $5.00/gal this summer, average U.S. prices declined as we moved into autumn because of typical seasonal price movements as well as declines in both crude oil prices and crack spreads (the difference between spot petroleum product prices and crude oil prices). This Thanksgiving, the American Automotive Association (AAA) forecasts 54.6 million people will travel 50 miles or more for the Thanksgiving holiday, a 1.5% increase compared with 2021.

Crude oil prices are the primary driver of U.S. gasoline prices, making up 54% of the total cost to produce a gallon of gasoline as of October 2022. Another significant factor in retail gasoline prices is the costs of refining crude oil into gasoline and other petroleum products. This past June, the refining component of the retail gasoline price made up 27% of the retail gasoline price, the highest percentage for any month since April 2007, because of high gasoline crack spreads. Crack spreads are used to indicate the value of refining crude oil into gasoline. Gasoline crack spreads have declined since the summer, with the refining component of retail gasoline prices falling to 20% in September. The refining component is still, however, higher than the monthly average refining share of the price of 14% from 2000 through 2022.

In addition, distillate crack spreads remain significantly elevated. As a result, we anticipate high crack spreads will contribute to higher refinery runs and gasoline production, which will contribute to a greater-than-normal seasonal inventory build ahead of next summer’s driving season. The four-week average for U.S. refinery capacity utilization as of November 18 was 92%, higher than the five-year (2017–21) maximum for this time of year. Gasoline inventories build each winter, and have increased by an average 33 million barrels from the end of October to the end of January for each of the past five years. In our November Short-Term Energy Outlook (STEO), we forecast U.S. gasoline inventories will increase more than 47 million barrels, which, if realized, would be the largest winter inventory build in our data, which starts in 1981 (Figure 2).

U.S. gasoline prices vary regionally, reflecting local supply and demand conditions, differing fuel specifications required by state laws, and taxes (Figure 3). Regional gasoline prices are usually the highest on the West Coast due to the region’s limited connections with other major refining centers, tight supply and demand conditions, and requirements for gasoline specifications that make it more costly to manufacture. West Coast prices as of November 21 averaged $4.78/gal, an increase of $0.59/gal (14%) over the same time last year. The Rocky Mountain region produces mostly all of the gasoline it consumes but receives some motor gasoline from the Midwest. Rocky Mountain gasoline retail prices averaged $3.64/gal, an increase of $0.11/gal (3%) over 2021.

Unplanned refinery outages in the Midwest have contributed to comparatively higher retail gasoline prices in the region recently. These refinery outages include an extended outage at the 160,000-barrel-per-day (b/d) BP-Cenovus refinery in Toldeo, Ohio, following an explosion and subsequent fire. The average retail price was $3.52/gal on November 21, $0.32/gal (10%) more than the Monday before Thanksgiving in 2021. The average retail price on the East Coast, which typically closely follows the U.S. average, fell to as low as $0.45/gal below the U.S. average in early October and increased to $3.54/gal as of November 21, 0.19 /gal (6%) more than a year ago. The Gulf Coast region, home to more than half of the nation’s refining capacity, typically has the lowest retail gasoline prices among all regions. The Gulf Coast average retail gasoline price was $3.02/gal on November 21, down $0.01/gal (almost 0%) from the Monday before Thanksgiving in 2021.

Gasoline demand is seasonal, reaching its highest demand in the summer months, yet high gasoline prices this year may have contributed to comparatively subdued gasoline demand this summer. For the week ending November 18, 2022, U.S. four-week average motor gasoline demand (measured as product supplied) was 8.7 million b/d. In our November STEO, we forecast November monthly average gasoline consumption will average 8.8 million b/d, which, if realized, this will be a 0.17 million b/d (1.9%) decline from November of 2021.

For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.