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Scroll over labels below to see different charts.
| Retail Prices (Cents Per Gallon) |
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| Retail Prices |
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Change From Last |
| 04/17/06 |
Week |
Year |
| Gasoline |
278.3 |
|
 10.0 |
54.6 |
| Diesel Fuel |
276.5 |
11.1 |
50.6 |
| Stocks (Million Barrels) |
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| Stocks |
Change From Last |
| 04/14/06 |
Week |
Year |
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Crude Oil |
345.2 |
 -0.8 |
26.3 |
| Gasoline |
202.5 |
 -5.4 |
|
-9.1 |
| Distillate |
114.6 |
-2.8 |
10.6 |
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Propane |
30.473 |
-0.380 |
0.333 |
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Released on April 19, 2006
(Next Release on April 26, 2006)
$3 per Gallon?
Just about everyone who has called EIA over the last few days asking about gasoline prices has asked the same question: Will the U.S. average retail price for regular grade reach $3 per gallon this year? With average prices up 28.5 cents per gallon the last three weeks to 278.3 cents per gallon, it is not surprising that EIA is being asked if $3 per gallon is around the corner.
While some stations have already posted prices for regular gasoline that exceed $3 per gallon and it is certainly possible that average retail prices across the country could reach that level sometime this year, EIA is not forecasting prices that high, on average, over a whole month. Our forecast assumes that there are no major problems in U.S. refineries, pipelines, or any part of the distribution chain. It also assumes that no additional oil production disruptions occur overseas.
Why doesn’t EIA see $3 per gallon as a fait accompli? To understand why, a look at the main factors behind high prices may be helpful. First, a larger-than-normal amount of refinery capacity is currently offline, reducing the production of gasoline. Three refineries on the Gulf Coast shut down by last fall’s hurricanes are only now reportedly beginning to return to operation, or soon will be. Additionally, some refineries that were not damaged by the hurricanes deferred planned fall maintenance until this spring, so as to maximize production immediately following the hurricanes. However, this means that we now have refineries undergoing previously scheduled spring maintenance, plus those that had deferred maintenance from last fall. Compared to weekly data last year for the similar period (the four weeks ending April 15, 2005), gasoline production for the most recent four-week period is down 457,000 barrels per day, while gasoline demand is up slightly compared to last year. As a result, finished gasoline inventories have been pulled down sharply, dropping more than 20 million barrels over the past four weeks, despite large volumes of imports. However, as these refineries return to full operation, gasoline production should increase, thus adding much-needed supply into the system.
Second, other factors influencing gasoline prices exhibit more uncertainty over the near-term future. Crude oil prices have risen to above $71 per barrel for West Texas Intermediate, which is higher than EIA had expected. Some of this price rise stems from an increase in the demand for inventory as refiners and others buy more crude oil now to put into inventories as a physical hedge against the possibility of supply disruptions later this year. While geopolitical concerns are likely to remain for the time being, at some point, inventories may be built sufficiently to provide enough of a hedge for some refiners, which could help halt the rise in crude oil prices. At the same time, this may occur just as refiners need more crude oil to supply the refineries returning from maintenance, so it remains highly uncertain which direction crude oil prices will head over the next several weeks, thus making it difficult to determine the impact crude oil prices might have on gasoline prices.
Third, the other major factor influencing gasoline prices is the transition from MTBE reformulated gasoline (RFG) to ethanol RFG in some parts of the country, most notably much of the East Coast and major cities in Texas. How smoothly this transition occurs will have a significant impact on the near-term path of gasoline prices. Already there are signs of some problems getting sufficient supplies in a timely fashion in parts of Virginia, mostly the Tidewater and Virginia Beach areas, with some problems also experienced around Richmond. However, unless problems related to this transition become more widespread, it may not have much impact on average monthly retail gasoline prices for the country as a whole. This transition was discussed in the January 5, 2006 issue of This Week in Petroleum and in a subsequent EIA report Eliminating MTBE in Gasoline in 2006 issued in February 2006.
In summary, while some factors may be difficult to forecast, significant increases in gasoline production as refineries undergoing maintenance return to full operation sometime over the next several weeks should stem the rise in gasoline prices and may, actually, cause them to decline somewhat. While demand will generally increase as we move closer to summer, increased domestic production, in addition to the expected continuation of significant volumes of gasoline imports, should be enough to cause prices to begin to fall again, albeit not nearly as much as they have increased. Whether this occurs later this month or next, EIA does expect prices to begin to come down. While the average U.S. price of regular gasoline could reach $3 per gallon sometime this year, that outcome is by no means a foregone conclusion given the current market situation.
U.S. Average Retail Gasoline Gains 10 Cents
The U.S. average retail price for regular gasoline increased by 10 cents last week, rising to 278.3 cents per gallon as of April 17, which is 54.6 cents higher than last year. Prices rose for the third week in a row, reaching their highest level since October 10, 2005. Prices were up throughout the country, with the East Coast seeing the largest increase of 11.2 cents to reach 280.1 cents per gallon. West Coast prices, the highest regional prices in the country, added 9.2 cents to 284.3 cents per gallon, while California prices rose 8.5 cents to 289.6 cents per gallon. Midwest prices rose 10.1 cents to 275.5 cents per gallon, which was 60.5 cents higher than this time last year.
Retail diesel fuel prices increased by 11.1 cents to reach 276.5 cents per gallon as of April 17, which is 50.6 cents higher than last year. Prices were up throughout the country, with the Gulf Coast seeing the largest regional increase of 12.4 cents to 272.5 cents per gallon, the lowest regional price in the country. West Coast prices were still the highest regional prices in the nation, adding another 6.9 cents to 288.1 cents per gallon.
Propane Inventories Move Lower
Primary stockholders of propane reported slightly lower inventories last week, as the nation’s stockpile of propane moved down by 0.4 million barrels, settling at 30.5 million barrels as of April 14, 2006. The Gulf Coast region accounted for all of the weekly drop in inventories with a reported decline of 1.4 million barrels, while the Midwest region reported an inventory gain of 0.9 million barrels during this same period. In other areas, the East Coast inched up by 0.1 million barrels while inventories in the combined Rocky Mountain/West Coast regions remained unchanged. Propylene non-fuel use inventories dipped by 0.1 million barrels during the week to account for a slightly lower 10.8 percent share of total propane/propylene inventories from the prior week’s share that measured 11.0 percent.
Text from the previous editions of “This Week In Petroleum” is now accessible through a link at the top right-hand corner of this page.
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