"The future is uncharted territory," John Felmy, API's chief economist, said following an industry conference call yesterday. "Crude is the dominant factor, but it's also about the world economy, if the [recently passed] economic-stimulus package will work and [image-nocss] how it will affect different individuals."
Another factor is the Organization of Petroleum Exporting Countries (OPEC). "Clearly, OPEC liked $100 crude, and they've begun to cut output," he said. "But it's a deep challenge in that a couple of countries-Iran and Venezuela-[are struggling]. With lower prices, it's hard to see them cutting output."
During the conference call, Ron Planting, statistics manager for API, said demand for gasoline did increase in January year over year and attributed the uptick to lower street postings. "It's not surprising," he said. "Gasoline prices are 40% lower than a year ago."
Supply is also up at record-setting levels for the month of January, Planting added, with both domestic production and imports increasing. Felmy tempered the finding by saying capacity in general within the United States has been increasing steadily over the past few years due mainly to improvements in existing facilities.
Looking back at what Felmy called a "rollercoaster" year with crude, gasoline and diesel prices, he said the industry saw crude skyrocket to $147 a barrel, bathed in a strong worldwide economy and rode a bumpy rise in energy demand leading up to the summer Olympics in China. Then the economy collapsed, and crude plummeted to $33 a barrel. Demand fell, but production and import levels remained high. By the end of the fourth quarter, refiners were losing money on gasoline.
Late last year, crude prices saw the bottom, and since, prices have risen to $48 a barrel, peaking in the second week of January. The current price spread between crude and average retail prices is "going back to normal," Felmy said, adding it was a sign of price stability.
"With gasoline, we saw a small demand increase, so we'll have to see if it continues," Felmy said. "Preliminary indications are that it will, but who knows. We have to consider the weather. And everyone's talking negatively about the economy, so it depends on what will consumers do."
Noting that he is not in the business of predicting prices, Felmy did say that events such as the run-up in crude prices early last year, from his perspective, were probably more a result of true supply and demand. While so-called speculation from Wall Street traders may have caused the movement to happen quicker, he said that if prices were artificially high, an increase in inventory would have been the result. But that did not happen.
"Unless inventory changes, then it's supply and demand," he said.
Click the Download Now button below for the latest API statistics.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.