Released on March 10, 2010
(Next Release on March 17, 2010)

Motor Gasoline and Diesel Fuel Markets: A Study in Contrasts

The Energy Information Administration's Short Term Energy Outlook (Outlook) published yesterday shows contrasting consumption patterns for motor gasoline and distillate fuel oil, both historical and projected. Table 1 summarizes historical and projected growth patterns for these fuels and some of their principal economic drivers.

Table 1: Actual and Projected Growth Rates for Motor Gasoline and Distillate Fuel Oil Consumption and their Major Economic Drivers (Percent)

 2007200820092010*2011*

Motor Gasoline Consumption+0.4-3.20.0+0.6+0.7
Real Personal Disposable Income+2.2+0.5+1.3+1.7+1.4
Motor Gasoline Real Cost Per Mile+6.0+12.5-28.0+17.9+2.2
Distillate Consumption**+0.6-6.0-8.0+.06+2.6
Total Industrial Production+1.5-2.2-9.7+4.0+3.4
Imported Goods Excluding Petroleum+2.3-4.1-17.4+13.9+8.4

*Projected
**Includes transportation diesel, heating oil and some bunker fuels. In 2008, transportation diesel (on-highway, railroad, and vessel bunkering) accounted for 70 percent of total distillate fuel usage (EIA, Fuel Oil and Kerosene Report, December 2009, Table 13).
Source: EIA, Short-Term Energy Outlook, March 2010.

As shown in the table, the recent economic downturn had a much smaller impact on motor gasoline consumption than on the use of distillate fuel oil. The Outlook projects that moderate growth in personal income and the rising cost of motor gasoline cost per mile will limit growth in motor gasoline consumption in 2010 and 2011. However, there has been a reversal in the trend of public transportation usage, which fell by 3.8 percent in 2009 after having risen by 4 percent in 2008 ( American Public Transportation Association ). Annual average distillate usage is projected to increase faster than motor gasoline demand, especially in 2011, boosted by a recovery in both industrial production and imported goods excluding petroleum.

Figures 1 and 2 provide a longer-term perspective and include projections from the current Outlook. Gasoline and distillate consumption and their related economic drivers are charted as indexes with 1998 as the base year. For example, the motor gasoline consumption index for 2009 is calculated by dividing average 2009 consumption by average consumption in 1998 and then multiplying that ratio by 100.

One economic driver of gasoline consumption is income. Rising income may lead to increasing ownership of cars and miles traveled and also ownership of larger, more powerful, but less fuel efficient cars. As Figure 1 shows, real personal disposable income has climbed steadily since 1998 despite the dampening effect of two recessions, as tax rebates and other distributive measures acted as stabilizers that kept it from declining. Motor gasoline consumption rose at less than half of the rate of real personal disposable income, reflecting, in part, the overall upward trend in real costs per mile of motor gasoline, averaging almost 5 percent between 1998 and 2009.

Figure

As shown in Figure 2, the trend in distillate consumption is closely tied to movements in industrial output and real imports excluding petroleum. Consequently, distillate fuel consumption is expected to see a stronger rebound as the economy begins to recover.

Figure

Retail Gasoline Price Gains 5 Cents

The U.S. average price for regular gasoline increased for the third consecutive week, moving up a nickel to $2.75 per gallon. The price was $0.81 above the average last year at this time. Prices rose in all regions of the country with the East Coast climbing four cents to $2.74 per gallon. Averages on the Gulf Coast, in the Rocky Mountains, and on the West Coast each increased about five cents to $2.65 per gallon, $2.69 per gallon, and $2.98 per gallon, respectively. The California price increased a nickel to $3.05 per gallon. The average in the Midwest increased the most, jumping nearly six cents to $2.70 per gallon.

For the third week in a row, the U.S. average price for diesel fuel increased. At $2.90 per gallon, the price went up by four cents to settle $0.86 above the price a year ago. On the East Coast, the average moved up three cents to $2.93 per gallon. In the Midwest and on the Gulf Coast and the West Coast, the averages each rose about five cents to $2.87 per gallon, $2.87 per gallon, and $3.00 per gallon, respectively. The California price moved up over three cents to $3.06 per gallon. In the Rocky Mountains, the average increased about four cents to $2.89 per gallon.

Propane Stocks Fall Again

After a modest drop the previous week, total U.S. inventories of propane dropped 1.5 million barrels to 25.3 last week, which is well below the 5-year average range. Midwest stocks fell 1.3 million barrels, while the Gulf Coast stocks were down 0.4 million barrels. East Coast propane stocks increased by 0.2 million barrels and the Rocky Mountain/West Coast region also grew slightly. Propylene non-fuel use inventories decreased their share of total propane/propylene stocks from 9.4 percent to 8.5 percent.

Residential Heating Oil Prices Increase
Residential heating oil prices increased during the week ending March 8, 2010. The average residential heating oil price rose 1.9 cents per gallon to reach 291.9 cents per gallon, 73.7 cents per gallon higher than the same time last year. Wholesale heating oil prices gained 6.7 cents per gallon to reach 218.9 cents per gallon, 87.6 cents per gallon higher than at this time last year.

The average residential propane price dropped 2.5 cents per gallon to reach 265.0 cents per gallon. This was an increase of 40.4 cents per gallon compared to the same period last year. Wholesale propane prices dropped 3.8 cents per gallon to reach 130.9 cents per gallon. This was an increase of 58.5 cents per gallon when compared to the March 9, 2009 price of 72.4 cents per gallon.

Text from the previous editions of This Week In Petroleum is now accessible through a link at the top right-hand corner of this page.