Historically, retail gasoline prices in the United States have followed a seasonal pattern. Prices typically rise during the summer driving season and drop after Labor Day. Over the 2004 through 2007 period and in 2009 (2008 is excluded due to the rapid run-up and subsequent crash in crude oil prices over the course of that year), the national average price for a gallon of regular gasoline fell an average of 22 cents between Labor Day and the middle of December.
However, 2010 has seen a reversal in this pattern; the national average price has risen by 30 cents per gallon since Labor Day, the largest increase over that period since EIA began publishing weekly retail gasoline price data in 1990. The $2.98 per gallon national average price of regular gasoline is the second highest on record for the third week of December, surpassed only by 2007 when the average price reached $3.00 per gallon.
Rising crude oil prices have been the main driver behind increasing U.S. and global gasoline prices. Crude oil prices have been supported by strengthening global demand for products. Demand growth in 2010 has been broad-based, with strong non-OECD oil demand throughout the year, augmented by a pick-up in OECD consumption, particularly in the United States, as the year progressed. Based on monthly data through September, U.S. gasoline demand increased (year-over-year) for six consecutive months, the longest such stretch since 2007. Weekly data for October, November, and December indicate that trend is continuing.
Strengthening demand combined with a tightening U.S. supply picture (particularly on the East Coast) to further boost price pressures. Gasoline supply in the East Coast market is highly dependent on imports, and events in the weeks following Labor Day complicated the import picture. In October and November, a planned outage at Irving Oil’s St. John refinery in Canada, a major supplier of gasoline to the United States, coupled with port and refinery strikes in France, limited the amount of gasoline available for import. These events, along with routine seasonal maintenance at several key domestic refineries, led to a sharp drop in inventories on the East Coast. In late August, gasoline inventories on the East Coast were in excess of their five-year average by over 11 million barrels; however, by the end of November, that excess inventory had been completely eroded, with inventory levels almost 3 million barrels under the five-year average.
The tight supply impact on East Coast retail gasoline margins, allowed prices to rise from $0.82 per gallon on Labor Day to $0.90 per gallon on December 20, rather than follow their more typical seasonal pattern of decline.
While gasoline supply constraints have recently eased, crude oil prices have continued to rise. During the past month, the spot price for West Texas Intermediate crude oil has increased almost $8 per barrel (19 cents per gallon) to just under $89 per barrel, as the market has become more confident that strong global oil demand growth will continue into 2011. Since changes in crude oil prices impact gasoline prices in a lagged fashion, gasoline prices may not fully reflect the most recent crude oil price increases, and thus, retail prices may be slow to soften, despite improving supplies.
Retail Gasoline and Diesel Prices Up Again
The U.S. average retail price for a gallon of gasoline saw a slight increase of less than a penny versus last week to remain at $2.98 per gallon, $0.39 per gallon higher than last year at this time. In a quiet week for gasoline prices, no major region moved more than half of a cent in either direction. The East Coast, Midwest, Gulf Coast, and Rocky Mountains all gained less than half of a cent. Moving in the other direction, the average West Coast price fell a fraction of a cent. Prices on the West Coast were the highest in the country at $3.19 per gallon, while prices in the Rocky Mountains were the lowest at $2.80 per gallon.
Diesel prices advanced this week with the U.S. retail average increasing almost two cents. The national average for a gallon of diesel is now $3.25 per gallon, $0.52 higher than last year at this time. Prices in the Midwest gained more than two cents versus last week, the most in the country, followed by the Gulf Coast which gained a full two cents. On the East Coast, the average diesel price was up a penny from last week. Rounding out the gains for the week, both the West Coast and Rocky Mountains increased half of a cent. This marks the eleventh increase in the last twelve weeks for the Rocky Mountains.
Residential Heating Fuel Prices Increase
Residential heating oil prices continued to rise during the period ending December 20, 2010. The average residential heating oil price increased by approximately $0.02 per gallon last week to reach $3.26 per gallon, an increase of nearly $0.51 per gallon from the same time last year. Wholesale heating oil prices increased by $0.02 per gallon last week, reaching a price just shy of $2.56 per gallon. This is $0.53 per gallon higher than last year’s price.
The average residential propane price increased by $0.05 per gallon to reach $2.68 per gallon. This was an increase of almost $0.28 per gallon compared to the $2.40 per gallon average from the same period last year. Wholesale propane prices increased by over $0.05 per gallon to $1.39 per gallon. This was an increase of almost $0.08 per gallon compared to the December 21, 2009 price of $1.31 per gallon.
Propane Inventories Continue to Drop
Total U.S. inventories of propane fell by 3.5 million barrels last week to end at 57.7 million barrels, as a cold weather affected large areas of the country. The Midwest region drew 2.1 million barrels of propane inventory. Meanwhile, the Gulf Coast regional stocks fell 0.9 million barrels and the East Coast region decreased 0.5 million barrels. The Rocky Mountain/West Coast regional inventories were down slightly. Propylene non-fuel use inventories represented 3.5 percent of total propane inventories.
Please Donate Today
Did you enjoy this article? Then please consider donating today to ensure that Eurasia Review can continue to be able to provide similar content.