While gasoline exports in 2012 remain high by historical standards, this year has yet to see the export growth of the past few years. However, the decrease in gasoline imports into the United States that has accompanied the export increase trend has continued.
While the U.S. remains a net gasoline importer, monthly data through the first quarter show the slowest import flows in more than a decade (Figure 1). Notwithstanding the uptick in gasoline imports seen last week, the sluggish import stream into the United States has been confirmed in weekly data as well.
The decline in gasoline imports in 2012 fits into the longer trend, which began midway through the last decade. Based on monthly data for the first quarter of 2012, gasoline imports into the United States averaged 715,000 barrels per day (bbl/d), 114,000 bbl/d (14 percent) lower than during the same period in 2011. This marked the lowest level of imports for the first quarter since 2001.
A large factor behind this decline has been sagging gasoline consumption. In the first quarter of 2007, U.S. drivers consumed just over 9.0 million bbl/d of gasoline, a record high for the first three months of the year; in the five years since, consumption has fallen about 450,000 bbl/d (5 percent) to average less than 8.6 million bbl/d for the first quarter of 2012. Supporting the decrease in imports has been the growth in ethanol blending into gasoline, which increased about 440,000 bbl/d between the first quarter of 2007 and 2012. Combining the effects of lower consumption and more ethanol blending, the domestic requirement for petroleum-based gasoline components has fallen almost 900,000 bbl/d since the first quarter of 2007. Imports have dropped about 330,000 bbl/d (32 percent) over the same period.
Import flows are affected by supply and demand conditions for gasoline across international markets; these balances are reflected in geographical price differentials among those markets. Looking at the price differentials between conventional gasoline in New York Harbor, the market hub for the U.S. East Coast, and Europe’s Amsterdam-Rotterdam-Antwerp (ARA) hub can provide insight into U.S. import patterns. The East Coast is the largest regional market for U.S. gasoline imports and is important to understanding national import trends. Regional gasoline demand significantly outstrips regional production capacity; on average, 86 percent of U.S. gasoline imports have come into the East Coast in the last ten years.
This year began with fairly robust gasoline imports, as the price for gasoline in New York Harbor averaged a seven-cent premium over the ARA hub for the last ten days of December 2011, opening up the arbitrage window to draw supplies from Europe into the East Coast market. Monthly data for 2012 show U.S. imports of gasoline were 840,000 bbl/d in January, due in part to the trans-Atlantic price differential. However, New York Harbor’s premium to ARA shrank to an average of just two cents per gallon during February and March, lessening the incentive to ship discretionary gasoline volumes across the Atlantic. In those two months, U.S. imports of gasoline averaged almost 190,000 bbl/d less than in January, at a time when imports typically begin to ramp up during refinery maintenance season.
Weekly data indicate gasoline imports into the United States have remained sluggish in the second quarter of this year. After falling in February and March, trans-Atlantic price differentials generally have not been strong enough to attract significant discretionary exports to the U.S. market over the past few months. Since the beginning of April, conventional gasoline in New York Harbor has traded, on average, at parity with gasoline in the ARA hub, significantly less than the premium required to pull supplies across the Atlantic. Weekly data show gasoline imports into the East Coast averaged 826,000 bbl/d in the four weeks leading up to June 15, a decrease of about 25 percent compared to 2011. However, this trend is by no means guaranteed to continue. New York Harbor’s premium to Europe has firmed somewhat in June, which has resulted in some increased gasoline volumes coming to the United States. For the week ending June 15, U.S. gasoline imports were 988,000 bbl/d, the highest since January. Additionally, the return of the idled Petroplus refineries in Europe could add more gasoline to that market, possibly weighing on ARA spot prices. Meanwhile, while not an immediate concern, the possible closure of Sunoco’s Philadelphia refinery on August 1, if no buyer is found, could have the opposite effect on East Coast markets.
Gasoline and diesel fuel prices continue to decrease
The U.S. average retail price of regular gasoline decreased 4 cents this week to $3.53 per gallon, 12 cents per gallon lower than last year at this time. The national average price has now fallen nearly 41 cents since April 2. Prices fell in all regions except the Midwest for the second consecutive week. The Midwest regional average price was up two cents to $3.56 per gallon, and is more expensive than the National average for the first time since September 2011. The West Coast average price dropped below the $4 mark for the first time since February 20, 2012, seeing the largest decline in the Nation, at 13 cents, to $3.96 per gallon. The East Coast price dropped almost five cents to $3.40 per gallon, while gasoline on the Gulf Coast fell about four cents to $3.27 per gallon. Rounding out the regions, the Rocky Mountain price declined about two cents to $3.69 per gallon.
The national average diesel fuel price decreased five cents to $3.73 per gallon, 22 cents per gallon lower than last year at this time. This marks the tenth consecutive week that the national average has fallen, and the ninth week that prices have declined in all regions. The West Coast saw the largest decrease for the fourth consecutive week, falling nine cents to $3.90 per gallon. The East Coast price dropped five cents to $3.77 per gallon. On the Gulf Coast, the average diesel price decreased over 4 cents to $3.65 per gallon. The Midwest and Rocky Mountain region prices both declined 4 cents to $3.66 and $3.83 per gallon, respectively.
Propane inventories pile on
Last week, U.S. inventories of propane grew by 1.3 million barrels to 60.0 million barrels in total, as the seasonal build continues. Propane stocks are now 22.1 million barrels (59 percent) higher than a year ago. Most of the growth in stocks occurred in the Midwest region, which added 1.0 million barrels. Gulf Coast inventories grew by 0.4 million barrels, while Rocky Mountain/West Coast stocks grew slightly and East Coast regional stocks dropped by 0.1 million barrels. Propylene non-fuel-use inventories represented 6.4 percent of total propane inventories.