(EIA) — In late December, the average national retail price of regular grade gasoline rose above $3 per gallon for the first time since October 2008. However, when gasoline sold for $3 per gallon in October 2008, gasoline prices were in the midst of a sharp decline that saw prices fall from a peak of $4.11 per gallon in July 2008 before bottoming-out at $1.61 per gallon in December 2008. Since then, prices have been on an upward trend.
The recent increase in gasoline price mainly reflects an increase in crude oil prices. From June through September, retail regular grade gasoline prices remained fairly steady, averaging about $2.70 per gallon. In October, they began to climb, increasing 34 cents per gallon from beginning of October through the end of December. Over the same period, crude oil prices increased $13.35 per barrel (32 cents per gallon).
Crude oil prices have risen to over $90 per barrel fueled by world petroleum demand growth, particularly in non-Organization for Economic Cooperation and Development Asian countries such as China and India, and other factors. As highlighted in the Energy Information Administration’s (EIA) most recent Short Term Energy Outlook (STEO) and last week’s This Week In Petroleum, EIA expects continuing tightening of world oil markets over the next two years, keeping upward pressure on crude oil prices.
There are many significant uncertainties that could push crude oil prices higher or lower than expected, which would contribute to higher or lower gasoline prices. Should Organization of the Petroleum Exporting Countries (OPEC) not increase production as global consumption grows, crude oil prices could be significantly higher than the baseline forecast. The rate of economic recovery, both domestically and globally, also remains uncertain due to a variety of factors including fiscal issues facing national and sub-national governments, and China’s efforts to address concerns regarding its growth and inflation rates.
The EIA expects regular-grade motor gasoline retail prices to average $3.22 per gallon during the summer (April through September) peak driving season this year, 46 cents per gallon higher than last year. There is regional variation in the forecast, with average expected prices on the West Coast about 26 cents per gallon above the national average. There is also significant uncertainty surrounding the forecast, with the current market prices of futures and options contracts for wholesale gasoline, considered in conjunction with the typical spread between wholesale and national average retail gasoline prices, suggesting more than a 25 percent probability that the national average retail price for regular gasoline could exceed $3.50 per gallon in the June through September period in 2011 and an 8 to 10 percent probability that it could exceed $4 per gallon in August and September 2011. EIA further discusses price uncertainty in the Energy Price Volatility and Forecast Uncertainty supplement to the STEO.
Retail Gasoline and Diesel Prices Increase for the Seventh Straight Week
The U.S. average retail price for a gallon of gasoline increased for the seventh straight week, advancing a cent and a half versus last week to $3.10 per gallon, $0.37 per gallon higher than last year at this time. Prices in the Rocky Mountains jumped three cents, the largest increase in the country. On the West Coast, prices were up two and a half cents, while Gulf Coast gasoline prices also rose more than two cents. East Coast prices saw a rise equivalent to the national average increase. The smallest increase was in the Midwest, where prices were up half of a penny. Prices on the West Coast remained the highest in the country at $3.29 per gallon, while prices in the Rocky Mountains remained the lowest at $2.89 per gallon.
Diesel fuel prices surged more than seven cents, surpassing $3.40 per gallon for the first time since October 2008. At $3.41 per gallon, the price was $0.54 higher than last year at this time. Leading the way, prices on the East Coast were up more than eight cents, closely followed by the Gulf Coast increase, which was slightly more than eight cents. Diesel in the Midwest gained seven cents for the week. The West Coast saw a six-cent jump in prices. Rounding out the regions, Rocky Mountain prices increased four cents.
Another Large Drop for Propane Inventories
Stocks of propane registered the largest draw of the current heating season last week (5.4 million barrels) to end at 45.1 million barrels in total. The bulk of the decline occurred in the Gulf Coast region, which drew 3.1 million barrels of propane. The Midwest region also had a large draw of 1.5 million barrels. The East Coast stocks dropped by 0.6 million barrels and the Rocky Mountain/West Coast regional inventories fell by 0.2 million barrels. Propylene non-fuel use inventories represented 5.6 percent of total propane inventories.
Residential Heating Fuel Prices Increase
Residential heating oil prices continued to rise during the period ending January 17, 2011. The average residential heating oil price increased to about $3.45 per gallon, $0.09 per gallon over last week and $0.50 per gallon more than last year at this time. Wholesale heating oil prices increased by $0.13 per gallon last week, reaching a price of $2.74 per gallon. This is $0.60 per gallon higher than last year’s price.
The average residential propane price increased by $0.03 per gallon almost reaching $2.80 per gallon. This was an increase of more than $0.12 per gallon compared to the $2.67 per gallon average from the same period last year. Wholesale propane prices increased to $1.45 per gallon. This was an increase of almost $0.11 per gallon compared to the January 18, 2010 price of $1.35 per gallon.