WASHINGTON -- The year 2005 was a tumultuous one in oil markets, said the Energy Information Administration (EIA). Gasoline prices reached all-time highs (not adjusted for inflation), diesel prices were higher than those for gasoline for most of the year and hurricanes inflicted substantial damage to both upstream and downstream infrastructure.
EIA recapped the year with excerpts from previous editions of its This Week in Petroleum.
Retail Gasoline Prices
Retail gasoline [image-nocss] prices trended upward throughout much of the year, even before Hurricanes Katrina and Rita arrived. Below are excerpts from two editions in 2005:
Twin Peaks (July 13): With peak summer gasoline demand occurring between the Memorial Day and Labor Day holidays, retail gasoline prices would be expected to correspondingly peak at some point during this period. However, since 2000, this price pattern has given way to one that shows two distinct retail peaks during most years. Why has this new pattern emerged? Although no one definitive answer is apparent, some new factors may have come into play, including refinery turnarounds during the late winter or early spring, adverse weather, and low gasoline inventories. For instance, in recent years, a late or prolonged winter caused an extended focus on distillate production, as well as delays in refinery maintenance schedules, which, in turn, caused delays in increased refinery production of gasoline, resulting in a slower seasonal build in gasoline inventories. Until spare capacity is restored throughout the gasoline supply chain, or inventories are rebuilt to higher levels and located efficiently, the recent trend of two gasoline price peaks may become commonplace.
Pain At the Pump (August 17): While gasoline prices have been generally rising for a long time, the magnitude of the latest increase has taken many people by surprise and increased the pain they feel when they fill up their vehicle. So, why have prices increased so dramatically in the last few days? Some of the increase is due to recent increases in crude oil prices. The remainder of the increase is due to the reduced supply of gasoline available due to recent refinery outages, just as demand is increasing during the last few weeks of summer vacation for many people. There have been a number of reports recently about outages at refineries across the country, which reduced the amount of gasoline that can be produced. With this occurring at the same time gasoline demand is at its seasonal peak, every gallon of gasoline has become that much more expensive.
Diesel Fuel Prices Remaining Above Gasoline Prices
Diesel prices have been unusually high this year, especially when compared to gasoline. Below are excerpts from two editions in 2005:
Walking Manny to Pitch to Ortiz (March 2): Nationally, the gap between diesel and gasoline prices has been wider this winter than in previous years. This can be largely attributed to high gasoline inventories and low distillate inventories this winter. While higher crude oil prices have pushed up retail prices in both the gasoline and distillate markets, lower product inventories for distillate fuels (diesel and heating oil) have put further upward pressure on those markets as robust gasoline inventories have eased retail gasoline prices, at least compared to diesel prices. Another key difference this year is increased global diesel demand, especially increased Chinese demand, which has sharply tightened the worldwide distillate fuel balance, thereby stoking competition, at the margin, between the Atlantic Basin and China for incremental barrels.
It's a Diesel World After All (June 22): Generally, the summertime is dominated by gasoline demand here in the United States as Americans take to the roads for their family vacations. However, this year, surging global distillate demand, especially in Europe and Asia, has retail diesel selling at a premium over retail gasoline. With diesel selling at a premium to gasoline, refiners have been adjusting their product mix to take advantage of prices. Distillate production has been at historically high levels as refiners try to capitalize on the price differential between the middle distillates and gasoline. However, despite this increased attention to distillate fuels, gasoline will likely remain the dominant product in U.S. petroleum markets for the foreseeable future. But as distillate demand growth outpaces that of gasoline here and abroad, and as U.S. markets must increasingly compete for product imports, the role of distillate fuels, including diesel fuel, heating oil, and jet fuel, will continue to grow in importance.
Hurricanes Katrina & Rita
Besides have a devastating impact on many lives, Hurricanes Katrina and Rita also had a dramatic impact on upstream and downstream petroleum infrastructure, causing gasoline and diesel prices to top $3 per gallon temporarily in many parts of the country. Below are excerpts from previous editions about the impact of the hurricanes:
The Sum of All Fears (August 31): Hurricane Katrina was a catastrophic event with a human cost than cannot yet be fully evaluated. It was also exactly what oil market analysts feared the most this summer. With oil prices rising throughout the year, analysts wondered what might happen should a supply shock occur as well. Unfortunately for many oil consumers, we will soon see what happens when a supply shock occurs when prices are already at high levels. In summary, the impact Hurricane Katrina will ultimately have on oil markets will depend on how quickly petroleum facilities, particularly refineries, will be able to recover to pre-hurricane status. How high product prices reach and how long they stay at elevated levels will largely be determined by how quickly refinery capacity can be restored.
A Significant Blow, But Not a Knockout (September 28): With Hurricane Rita making landfall near the Beaumont/Port Arthur, Texas, and Lake Charles, La., refining centers, 7 refineries, amounting to 1.7 million barrels per day of refinery capacity (10% of U.S. refinery capacity), were directly in the path or very near the path of the hurricane. Damage to some of these refineries, and the lack of electrical power supply to others, is preventing their immediate return to service. Combined with the 5% of refinery capacity near the New Orleans area that was still out following Hurricane Katrina, as much as 15% of U.S. refinery capacity could be out for at least another couple of weeks. While Hurricane Rita undoubtedly delivered a significant blow to the U.S. refining industry, it did not deliver the knockout punch that some had feared. Rita made landfall north and east of the Houston/Texas City/Galveston refining center, home to more than 2 million barrels per day (or over 12%) of U.S. refinery capacity. If all of these refineries were also affected for an extended period, then over a quarter of the countrys refinery system would be offline. For now, the critical factor is how much of the refining capacity that is still shut down can return to service over the next few weeks.
Residential Heating Oil Prices Decrease While Propane Prices Increase
Residential heating oil prices retreated for the period ending Dec. 26, 2005. The average residential heating oil price decreased 0.5 cent from last week to reach 243.3 cents per gallon, an increase of 45.5 cents from this time last year. Wholesale heating oil prices increased by 1.1 cents to reach 176.9 cents per gallon, an increase of 41.3 cents compared to the same period last year.
The average residential propane price gained 0.9 cent, to reach 200.6 cents per gallon. The resulting price was 27.7 cents over the 172.9 cents per gallon average for this same time last year. Wholesale propane prices decreased 0.9 cent per gallon, from 118.8 cents to 117.9 cents per gallon. This was an increase of 28.3 cents from the December 27, 2004 price of 89.6 cents per gallon.
U.S. Average Retail Gasoline & Diesel Prices Both Fall
The U.S. average retail price for regular gasoline dropped 1.4 cents to 219.7 cents per gallon as of December 26, which is 40.6 cents higher than last year. Prices were lower throughout the country compared to the previous week, with the exception of the Central Atlantic region, which saw the average price rise by 1.1 cents per gallon. The Midwest region saw the largest average decline, with prices falling 2.4 cents per gallon between December 19 and December 26. The highest average regional price in the country was 226.9 cents per gallon in the Central Atlantic region, while the lowest average regional price was 211.3 cents per gallon found in the Rocky Mountain region.
Retail diesel fuel prices also fell 1.4 cents to reach 244.8 cents per gallon as of December 26, which is 46.1 cents higher than last year. Regional price changes were mostly down throughout the country compared to the previous week, with the exception of the West Coast which saw the average price rise by 1.8 cents per gallon, and the Rocky Mountain region where the average price was unchanged. Midwest prices fell by 2.3 cents, the largest regional price decline in the country. The highest regional price in the country was New England, where the average price was 264.3 cents per gallon, while the lowest regional price was found in the Rocky Mountain region, where the average price was 241.0 cents per gallon.
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