The U.S. average retail price for regular gasoline fell steadily through the end of 2012, to $3.25 per gallon on December 17 from $3.88 per gallon on September 17. After rebounding slightly in the final weeks of 2012, prices have held relatively steady through the first three weeks of 2013, increasing less than two cents per gallon to $3.32 per gallon. The stable prices in 2013 reflect Brent crude oil prices that have traded in a relatively well-defined range since the beginning of the year, and gasoline crack spreads that are largely unchanged, on average, from December. However, the stable national average does not capture the significant regional variation in gasoline prices, with the highest average prices for any Petroleum Administration for Defense District (PADD) on the West Coast (PADD 5) at $3.50 per gallon and the lowest average prices in the Rocky Mountains (PADD 4) at $2.88 per gallon (Figure 1).
Gasoline prices fell in fourth-quarter 2012 as a result of modestly decreasing crude oil prices and narrowing gasoline crack spreads throughout the United States. Brent crude oil, the crude that U.S. product prices generally track, fell from a September 2012 average of $112.86 per barrel to an average of $109.49 per barrel in December 2012, a decrease of 8 cents per gallon. Most of that decline was in October, and Brent prices remained in a fairly well-defined range from late October through the end of the year. However, decreasing gasoline crack spreads contributed most of the late-2012 price decreases.
Refineries have been running at high levels in response to strong distillate fuel crack spreads and low crude oil input costs in some regions, particularly the Midwest (PADD 2) and Rocky Mountains. The high refinery runs have led to increases in gasoline production, at a time when gasoline demand in the United States has been stagnant. This situation is reflected in high gasoline inventory levels. In four of the five PADDs, inventory levels are above their five-year average, PADD 1 being the only exception. As of January 18, U.S. total gasoline inventories stood at 233.3 million barrels, 8.3 million barrels (4 percent) above their five-year average level and 37.8 million barrels (19 percent) above early-October levels. Some of this inventory build is attributable to typical seasonal patterns. In anticipation of spring refinery maintenance season, market participants will often build inventories in the fourth quarter and early first quarter while demand is lower. However, the 37.8-million-barrel inventory build between the first week of October and mid-January was 17.3 million barrels above the five-year average.