Relative to crude oil prices, variations in the U.S. average refining margin have not contributed much to gasoline price changes since 2007. Wholesale gasoline price margins are affected mainly by local or regional factors. For example, the balance tightens seasonally as demand increases in spring through the peak summer driving months, adding pressure to the gasoline wholesale margins. Summer-specification gasoline is typically priced higher than winter gasoline, as it costs more to produce, which adds to the wholesale margin during the summer. In extreme cases, local supply disruptions such as from unplanned refinery or delivery outages can push up wholesale margins and product prices beyond any changes in crude oil prices. This occurred in early 2007, when unusually high refinery outages in the face of strong demand and weak imports drove wholesale gasoline margins up as seen in Figure 1. These types of imbalances are usually relatively short-lived and don't impact all regions.
Table 1 shows gasoline consumption fell 550,000 bbl/d (6 percent) between 2007 and 2011. Over the same period, the volume of ethanol in the gasoline pool rose by 439,000 bbl/d. These two factors alone could have pressured U.S. refiners to reduce production of refined gasoline and gasoline blending components by as much as one million bbl/d over that period, all else equal. However, imports fell 353,000 bbl/d and exports increased 382,000 bbl/d. Given the 735,000 bbl/d change in the gasoline trade balance from decreased imports and increased exports, U.S. refinery production only dropped 216,000 bbl/d.
Currently, as we enter 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.
Figure 2 shows average U.S. wholesale gasoline margins for the second quarter, which are illustrative of preparations for summer driving season, based on the average refiner acquisition cost of crude oil. From 2007-2011, the average second quarter wholesale margin was 52 cents per gallon. The April STEO is forecasting wholesale margins for second quarter of 2012 will average 61 cents per gallon, which is about seven cents more than the 2011 level. Excluding 2007 data, when heavy refinery outages left markets particularly strained, the second-quarter average from 2008-2011 was 42 cents per gallon. 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.