On April 21, the U.S. average retail price for regular gasoline was $3.68 per gallon (gal), an increase of 39 cents/gal since the 2014 low in early February. This recent retail price increase is mostly the result of an increase in crack spreads (the difference between the price of wholesale gasoline and the price of crude oil) attributable to typical seasonal factors such as refinery maintenance and higher travel-related demand as the driving season begins. In 2014, the average crack spread during the first four months of the year has been close to the five-year average. However, the 2014 seasonal increase has been modestly steeper than normal, which partially stems from lower-than-normal crack spreads in January and February. In its April 2014 Short-Term Energy Outlook (STEO), EIA forecasts that retail gasoline prices will continue to rise into May and then begin to ease as refinery runs peak, adding supply to the market.
Changes in the price of retail gasoline result from changes in both the price of crude oil and wholesale gasoline crack spreads. Crude oil prices do not display a seasonal pattern. Crack spreads for gasoline, however, are very seasonal. Over the past five years, gasoline crack spreads (measured here as the difference between the Nymex prompt RBOB futures contract and the spot price of North Sea Brent crude oil) have typically been flat in January and February, averaging 17 cents/gal during those months. Then they have generally increased, peaking in May at an average of 35 cents/gal. This post-February increase is largely related to typical seasonal factors such as refinery maintenance, increasing demand from driving, and the switch to summer-grade gasoline, which is more costly to produce than winter-grade gasoline. Crack spreads then typically decline as those factors moderate, reaching the low point for the year during the fourth quarter. The previous five-year average crack spread during the fourth quarter was 10 cents/gal.
For the past three years, retail gasoline price increases during the first half of the year were largely related to crude oil price increases in the first quarter. Because the crude oil price increases occurred just before or concurrent with crack spread increases, the related gasoline price increases were conflated with the effects of seasonal movements in crack spreads. Last year, February marked the high point for the monthly average Brent price at $116 per barrel (bbl), contributing to the peak retail price of $3.78/gal on February 25. Likewise, in both 2011 and 2012 crude oil prices increased sharply from January through the end of the first quarter. These rising crude prices pushed 2011 retail gasoline prices to a peak of $3.97/gal on May 9 and 2012 prices to a peak of $3.94/gal on April 2. In both years, crack spreads generally held true to typical seasonal patterns.