Summer 2012: The Four-Dollar Question

EIA: Retail price of regular gasoline will peak at $4.01 in May

WASHINGTON -- The question posed by the news media going into summer, the peak driving season, is whether retail consumers will be paying more than $4 per gallon for regular gasoline when they fill up their tanks. While the national average retail price for regular gasoline still hovers just under that mark at $3.94 per gallon on April 9, in many areas this question has already been answered.

Consumers on the West Coast have been paying more than $4 per gallon, on average, since the end of February. Retail prices in the Chicago area have averaged more than $4 per gallon for the past month. But other areas have prices still below $4 per gallon, such as the Rocky Mountain region, where prices averaged $3.79 per gallon on April 9, as refiners supplying that area have access to discounted land-locked crude oil.

The U.S. Energy Information Administration's (EIA) April 2012 Short-Term Energy and Summer Fuels Outlook (click here) is forecasting that the monthly average national retail price of regular gasoline during 2012 will peak at $4.01 per gallon in May. If this forecast is realized, May prices would reflect the third highest monthly nominal average price on record after July 2008 and June 2008. For the summer as a whole (April through September) prices are forecast to average $3.95 per gallon, which is 6.3% higher than last summer's average of $3.71 per gallon.

Movements in retail gasoline prices are driven primarily by changes in both crude oil prices and wholesale margins (the difference between the wholesale gasoline price and the average U.S. refiner acquisition cost of crude oil [RAC]). Taxes and retail distribution costs do not vary that much. Crude oil prices have been the major factor impacting gasoline prices in recent years and continue to be the driver in the STEO. Higher crude oil prices account for the entire increase in EIA's 2012 summer forecast compared to 2011, as wholesale margins are expected to be virtually unchanged this summer compared to last.

Currently, as the nation enters the driving season, total gasoline inventories are within their seasonally typical range, indicating a normal balance between new supply (production and imports) and uses (consumption and exports). This implies typical seasonal pressures on wholesale margins as we move into the summer driving season.

While the forecast for this spring is higher than that average, it is well below the levels seen in 2006 and 2007 when global consumption growth outpaced refining capacity and led to very tight product markets.

The U.S. average retail price of regular gasoline decreased 0.2 cent this week to stay at $3.94 per gallon, 15 cents per gallon higher than last year at this time. The West Coast price was down about three cents to $4.20 per gallon, while the Rocky Mountain price increased four cents to $3.79 per gallon. The Gulf Coast price increased about two cents to $3.82 per gallon, while the Midwest price decreased five cents to $3.86 per gallon. Rounding out the regions, prices on the East Coast increased almost four cents to $3.95 per gallon.

The national average diesel fuel price increased 0.6 cent to $4.15 per gallon, 7 cents per gallon higher than last year at this time. The West Coast was the only region where the price decreased, dropping one cent to $4.41 per gallon. The Midwest and Gulf Coast prices both rose to $4.06 per gallon, and the Rocky Mountain price increased to $4.13 per gallon. The East Coast price has been flat for the last three weeks at $4.19 per gallon.

Click here for the full EIA report and charts.

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