Memorial Day Gasoline Prices
Despite cool weather along the East Coast over the past several weeks, Memorial Day weekend, the unofficial start to the summer driving season is upon us. Some may interpret recent increases in gasoline prices as yet another manifestation of a long-standing tendency for gasoline prices to rise dramatically in the days before the holiday weekend. The numbers from the last few years do not, however, support this view. Daily gasoline prices from the American Automobile Association’s (AAA) Fuel Gauge Report show that prices have actually fallen slightly in the week preceding the Memorial Day holiday over the past four years (2004-2007), after having risen earlier in the month of May.
This year, daily retail gasoline prices reported by AAA have climbed every day since May 5, and EIA’s weekly retail gasoline survey has increased steadily since March 24. A dramatic increase in the price of crude oil, rather than the transition to summer-grade gasoline or the start of the peak summer driving season, has been the main driver in pushing gasoline prices higher so far this spring. The spot price of West Texas Intermediate crude oil, which is the U.S. benchmark for light, sweet crude oil, has risen steadily from $101.54 per barrel on March 31 to a record high of $128.93 per barrel on May 20. This difference of over $27 per barrel translates into about 65 cents per gallon. Meanwhile, EIA’s weekly retail gasoline survey shows that the U.S. average retail price for regular gasoline has increased by about 50 cents over the same period, increasing from $3.29 per gallon on March 31 to $3.79 per gallon on May 19. With the cost of crude oil currently accounting for more than 70 percent of the price of a gallon of gasoline, it is not surprising that consumers are paying more at the pump.
Another factor that usually puts upward pressure on gasoline prices at this time of year is seasonally increasing demand. However, with gasoline demand showing slightly negative annual growth so far this year, gasoline prices are not feeling as much pressure from the demand side as they normally would ahead of Memorial Day. In fact, AAA is predicting an approximate one percent decline from 2007 in the number of Americans who will travel more than 50 miles from home by automobile over the holiday weekend.
Heading into June, we can expect gasoline prices to continue increasing if crude oil prices continue to climb. Softer demand this spring has already had a dampening effect on gasoline prices, which would be higher than they currently are if year-on-year demand growth was near long-term norms. While that might sound like cold comfort to consumers, there will still be millions of Americans hitting the roads this weekend.
U.S. Average Gasoline and Diesel Prices Continue Upward Surge
The U.S. average retail price for regular gasoline climbed to another all-time high, going up 6.9 cents to 379.1 cents per gallon. This was the eighth consecutive week for the national average price to increase, with the cumulative change totaling 53.2 cents. All regions recorded price hikes, with the East Coast jumping by 8.2 cents (the most of any region) to 379.5 cents per gallon. The average price in Central Atlantic portion of the East Coast surged up by 9.5 cents to 382.4 cents per gallon, 74.2 cents above the price a year ago. The average price in the Midwest went up 6.3 cents to 379.9 cents per gallon. The average price in the Gulf Coast region was 368.9 cents per gallon, a jump of 7.3 cents. Increasing by 7.7 cents to 368.6 cents per gallon, the price in the Rocky Mountain region remained the lowest in the country but only by a mere three-tenths of a cent. Once again, the average price for the West Coast was the highest in the nation, moving up by 5 cents to 388.3 cents per gallon. The average price in California rose by 3.3 cents to 395.2 cents per gallon.
During the past two weeks, the national average diesel price has surged, shooting up by 34.8 cents. For the most recent week, the national average price jumped to 449.7 cents per gallon, 16.6 cents over last week and 169.4 cents above the price a year ago. The average price on the East Coast increased by 16.7 cents to 454.4 cents per gallon, 174.6 cents higher than a year ago. In the Central Atlantic portion of the East Coast, the price went up by 16.6 cents to 468.2 cents per gallon. In the Midwest, the price swelled 16.5 cents to reach 446.3 cents per gallon. The average price in the Gulf Coast grew by 17.5 cents to 444.3 cents per gallon, the largest increase of any region. In the Rocky Mountain region, the average price increased by 16.6 cents to 444.2 cents per gallon. On the West Coast, the average price moved up by 15.6 cents to hit 461 cents per gallon. The average price in California gained 19 cents to 473.7 cents per gallon, 178.2 cents higher than a year ago.
Propane Inventories Report Robust Build
The weekly build in propane inventories reported a robust 2.7 million-barrel gain last week, moving the Nation’s primary supply of propane up to an estimated 34.0 million barrels as of May 16, 2008. With last week’s gain, propane inventories moved ahead of last year’s level by more than one million barrels, although inventories continue near the lower boundary of the average range. The Midwest reported the highest regional stockbuild last week that totaled 2.2 million barrels, followed by the East Coast and Gulf Coast regions with gains of 0.2 million barrels and 0.3 million barrels, respectively. During this same time, the combined Rocky Mountain/West Coast region remained unchanged for the third consecutive week. Propylene non-fuel use inventories also remained relatively unchanged last week although the share of non-fuel use to total propane/propylene fell to 6.7 percent from 7.4 percent from the prior week.