The average U.S. retail price for regular motor gasoline has risen 45 cents per gallon since the start of the year, reaching $3.75 per gallon on February 18. Between January 1 and February 19, the price of Brent crude, the waterborne light sweet crude grade that drives the wholesale price of gasoline sold in most U.S. regions, rose about $6 per barrel, or about 15 cents per gallon. A simple calculation, which modestly understates the role of higher crude prices to the extent that crude price increases during December 2012 were still not fully passed through in retail gasoline prices at the start of 2013, suggests that about two-thirds of the rise in gasoline prices since the start of the year reflects higher gasoline crack margins.
With factors affecting global crude oil markets having been addressed in recent U.S. Energy Information Administration (EIA) commentary, this article focuses on some of the major factors behind the increase in gasoline crack spreads. Among these are: planned and unplanned refinery maintenance; the low starting level for gasoline crack spreads going into 2013; preparation for seasonal fuel specification changes; and developments in global product demand that have affected domestic refinery utilization rates, maintenance needs, and product balances. While these factors have played an important role, other factors may also have contributed to recent short-term price movements. Finally, some of the most recent trends in domestic prices and refinery operations and the amount of gasoline headed toward the United States from abroad provide some indication that gasoline crack spreads may soon ease.
Throughout much of November and December 2012, gasoline crack spreads were very low, and in some cases negative (a barrel of gasoline worth LESS than a barrel of Brent crude). As a result, retail gasoline prices were lower than one would typically expect given prevailing crude oil prices, with the lowest price of 2012 reached in EIA's weekly survey on December 17. Since the beginning of 2013, reformulated gasoline blendstock for oxygenate blending (RBOB) crack spreads versus Brent have increased 12, 34, and 46 cents per gallon, respectively, in New York Harbor (Figure 1), the Gulf Coast (Figure 2), and Los Angeles.
Both planned and unplanned maintenance at several refineries have supported higher crack spreads. Many refineries schedule maintenance early in the year when gasoline demand is seasonally low. Trade press estimates indicate that off line refinery capacity increased from the beginning of 2013 to more than 1.7 million barrels per day (bbl/d) for the week ending February 15. As a result, EIA estimates that gross inputs into U.S. refineries fell 9 percent from 15.9 million bbl/d per day in mid-December to 14.4 million bbl/d for the week ending February 15.