Diesel fuel prices, which averaged $4.37 per gallon last summer, are projected to average $2.27 this summer. Projected prices vary by region of the country. As always, these energy price forecasts are highly uncertain, said EIA, as both recent experience and the sizable participation in near-term futures options contracts (with a wide range of strike prices) clearly demonstrate that prices can move within a wide range in a relatively short period.
Because taxes and retail distribution costs are generally stable, movements in gasoline and diesel prices are driven primarily by changes in crude oil prices and wholesale margins. These retail price projections reflect lower prices for the refiner's average acquisition cost of crude oil, projected to average about $52 per barrel this summer, which is significantly lower than the $116 per barrel average last summer. Wholesale gasoline margins (the difference between the wholesale price of gasoline and the average cost of crude oil) are expected to be relatively unchanged from the average of 39 cents per gallon last summer. Wholesale diesel margins, on the other hand, are projected to be significantly lower this summer (31 cents per gallon) than last summer (80 cents per gallon) because of global weakness in diesel fuel markets.
EIA is projecting a slight increase in gasoline consumption, which is the result of two counter-balancing forces: significantly lower gasoline prices (driving demand up) and a weak economy (driving demand down). As consumers respond to recent and projected lower gasoline prices, we project that motor gasoline consumption will increase by about 90,000 barrels per day (bbl/d) during the summer driving season, about a 1% increase over last summer, despite the current economic downturn. At the same time, distillate fuel consumption, which, affected more strongly by ongoing economic weakness (particularly in industrial output and foreign trade), is expected to decline by about 170,000 bbl/d or about 4.5% from last summer's average, in spite of lower prices.
The operation of domestic refineries is expected to change to reflect differences in consumption and prices of the two fuels. Last spring, U.S. refineries did not undergo the usual seasonal shift from emphasizing distillate fuel production to motor gasoline production, but continued to produce record quantities of distillate fuel. This summer, distillate yields (the percent of finished product produced from crude oil and unfinished oils) are expected to average 26.3%, down from 27.8% last summer. Motor gasoline yields are expected to average 45%, up from 42.8% last summer. Refinery utilization rates are projected to average 84%, the lowest since the summer of 1985, reflecting the general weakness in petroleum product demand.
At the onset of the summer driving season (April 1), total gasoline stocks were 217 million barrels, which is 4 million barrels below last year but 8 million barrels above the previous 5-year average. Because of the lower current inventory level compared to last year, EIA projects the average stock draw over the summer will be about 60,000 bbl/d, compared with last summer's 173,000 bbl/d stock draw (and the average of 45,000 bbl/d over the last five years). Distillate inventories begin this summer season at a record-high 142 million barrels, about 30 million barrels higher than the previous five-year average. While distillate stocks normally build during the summer season in preparation for winter heating demand (an average 21 million barrels during the five previous summers), inventories this summer are expected to show little change.
In sum, given the big decline in crude oil prices from the peak levels experienced in July 2008, consumers are unlikely to see national average retail gasoline or diesel prices this summer that are anywhere near last summer's record levels. The weakening of global distillate fuel demand, driven by the economic downturn, is also expected to sharply reduce the gap between distillate and gasoline margins. If the economy (domestic or international) turns out to be even weaker than projected, it is even possible that average retail diesel prices could fall below average motor gasoline prices this summer.
The current national average price for regular gasoline increased slightly, moving up to $2.05 per gallon, $1.34 below the price a year ago and $2.06 below the all-time high set on July 7, 2008. On the East Coast, the price was nearly flat, increasing one-half cent to nearly $2.03 per gallon. The average price in the Midwest rose 2 cents to $2.01 per gallon. The average price on the Gulf Coast increased less than a penny to $1.96 per gallon, making it not only the lowest regional price but also the only region where the price was below $2 per gallon. The largest increase occurred in the Rocky Mountains where the price rose by more than 4 cents to almost $2.01 per gallon. The price on the West Coast also increased, rising over 2 cents to $2.27 per gallon. In California, the price increased to $2.34 per gallon.
At the national level, the current price of diesel fuel was essentially unchanged, creeping up just one-tenth of a cent. At $2.23 per gallon, the price was $1.83 below the price a year ago. On a regional basis, prices in the west rose between 2 and 4 cents per gallon, while prices elsewhere were nearly flat, declining by less than a penny. On the East Coast, the price was $2.27 per gallon, while the Midwest price was $2.18 per gallon. The average price on the Gulf Coast dipped to $2.20 per gallon. The price in the Rocky Mountains increased almost 4 cents to $2.25 per gallon. On the West Coast, the price grew by two and a half cents to $2.34 per gallon, while the price in California rose to $2.35 per gallon.
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.