EIA this week projected that U.S. average regular gasoline retail prices will average $2.45/gallon (gal) during the April-through-September 2015 period (summer 2015), down from the $3.59/gal average during summer 2014. The significant price decline reflects a large drop in Brent crude oil prices. As daily and weekly national average prices can differ significantly from monthly and seasonal averages, and because there are also significant regional differences in gasoline prices, prices in some areas could exceed the national average by $0.40/gal or more.
EIA's projections appeared in the April 2015 Short-Term Energy Outlook.
Brent crude oil prices fell sharply in late 2014 and early 2015 as global supply exceeded demand, contributing to strong increases in oil inventories. EIA projects the Brent crude oil spot price to average $58/barrel (bbl) ($1.39/gal), down from the summer 2014 average of $106/bbl ($2.52/gal). The projected $1.13/gal decline in Brent price this summer compared with last summer accounts for the entire decline in retail gasoline prices compared with last summer (Figure 1). Changes in crude oil price are one of the main determinants of changes in retail gasoline prices, and U.S. gasoline prices are more closely tied to prices for globally traded North Sea Brent rather than domestic crude oil prices.
In addition to the price of Brent crude oil, U.S retail gasoline prices are generally determined by three broad elements: (1) refining costs and profit margins (wholesale margin); (2) retail and distribution costs and profit margins; and (3) taxes. Elements two and three compose the retail segment of the supply chain, and they tend to be relatively stable. Like crude oil prices, refining costs and profit margins can be volatile. They also have a seasonal component and typically are higher during the spring and summer, when gasoline demand is higher, and lower during the fall and winter.
This summer, average refining margins are projected to be about the same as last summer, as more gasoline supply from greater refinery runs balances higher projected gasoline consumption. EIA projects total crude oil and unfinished oil refinery inputs to be 180,000 barrels per day (bbl/d) (1.1%) more this summer compared with last summer. Higher refinery throughputs largely reflect fewer anticipated refinery outages during April and May, as well some minor capacity additions. As a result of higher refinery runs, gasoline production is expected to be almost 100,000 bbl/d greater than last summer. Projected motor gasoline consumption for summer 2015 averages 9.2 million bbl/d, an increase of 140,000 bbl/d (1.6%) over last summer. Year-over-year increases in summer highway travel, projected to be 2.5%, are partially offset by a 0.9% increase in fleetwide fuel efficiency.
Any difference in crude oil prices or refinery margins from EIA's baseline forecast would be reflected in retail gasoline prices. The value of futures and options contracts traded during the 5-day period ending April 2 continue to suggest high uncertainty in the oil price outlook. For example, the market's expectations (at the 95% confidence interval) for monthly average prices in December 2015 ranged from $20/bbl below to $35/bbl above the average trading price for that month's futures contract. Additionally, prices for gasoline and other petroleum products are particularly sensitive to unplanned refinery outages, and any sudden loss of gasoline supply from the market could cause retail prices to be higher than forecast.
Retail gasoline prices also vary by region. Summer 2015 prices are projected to be the highest on the West Coast, at an average of $2.82/gal. Prices on the West Coast are often the highest in the country because California requires a blend of gasoline that is relatively costly to produce and some states in the region have higher state tax rates than the national average. Prices are projected be lowest on the Gulf Coast, at an average of $2.25/gal. Gulf Coast prices are often among the lowest in the country because the region generally has low state tax rates and abundant gasoline supplies, as it is home to about half of all U.S. refining capacity. Retail prices in the Midwest, East Coast, and Rocky Mountains are projected to average $2.41/gal during summer 2015.
U.S. average gasoline and diesel fuel prices decrease
The U.S. average retail price for regular gasoline decreased four cents from last week to $2.41 per gallon as of April 6, 2015, $1.18 per gallon lower than the same time last year. The Rocky Mountain price posted the lone increase, up a penny to $2.32 per gallon. The Midwest price led the declines, down seven cents to $2.31 per gallon. The West Coast price decreased five cents to $2.95 per gallon. The East Coast price declined two cents to $2.35 per gallon, and the Gulf Coast price was down less than half a cent to $2.18 per gallon.
The U.S. average diesel fuel price decreased four cents from the prior week to $2.78 per gallon, $1.18 per gallon less than the same time a year ago. The Midwest price decreased five cents to $2.68 per gallon. The East Coast price fell four cents to $2.95 per gallon, and the Gulf Coast price fell three cents to $2.64 per gallon. The West Coast price decreased three cents to $2.92 per gallon, and the Rocky Mountain price decreased two cents to $2.73 per gallon.
Propane inventories gain
U.S. propane stocks increased by 0.6 million barrels last week to 58.0 million barrels as of April 3, 2015, 30.4 million barrels (110.1%) higher than a year ago. Midwest inventories increased by 1.0 million barrels and East Coast inventories increased by 0.1 million barrels. Gulf Coast inventories decreased by 0.4 million barrels and Rocky Mountain/West Coast inventories decreased by 0.1 million barrels. Propylene non-fuel-use inventories represented 7.9% of total propane inventories.