As May began, the retail price of regular gasoline continued its recent decline from levels reached earlier this spring. As of May 7, prices averaged $3.79 per gallon, down 15 cents per gallon since April 2. If last week's crude oil price declines persist, the recent fall in gasoline prices could continue. However, while the forecast in the U.S. Energy Information Administration's (EIA) May 2012 Short-Term Energy Outlook (STEO) is showing lower crude oil and petroleum product prices this summer than were projected a month ago, it does not reflect a continuation of the sharp price drop seen last week. STEO's May forecast has both global demand and supply growth higher in 2012 than in the April projection, but with a bigger boost to projected supply. The revised market balance points to less price pressure than was seen a month ago.
Brent crude oil spot prices, which are indicative of the conditions in the global market for waterborne light sweet crude not subject to transport constraints, fell about $6 per barrel in April (from $126 per barrel on April 2 to $120 per barrel on April 30), but then dropped about $7 per barrel during the first week of May. West Texas Intermediate (WTI) began April at $105 per barrel, but stayed relatively flat through the month, likely supported in part by anticipation of the accelerated startup of the reversed Seaway pipeline in mid-May. However, WTI prices moved down with the rest of the global crude oil market during the first week of May.
During April, increasing concerns were voiced about the pace of economic growth, a key oil demand driver. At the same time, OPEC officials and key OPEC member countries expressed concerns over high prices, and data also suggested increased supplies from OPEC countries. Some analysts have suggested that last week's sharp drop in prices responded to U.S. employment data that dampened expectations for economic growth, and thus petroleum demand growth, as well as increased concern regarding the European economy. The May STEO forecast does not reflect a change for the worse in the economic situation. While the market reacted strongly to disappointing news, world balances still seem to point to crude prices returning to levels closer to those seen at the end of April.
With the recent decline in crude oil prices, gasoline wholesale prices seemed to have peaked in April -- earlier than usual. Gasoline spot prices on the Gulf Coast and New York Harbor fell more than crude oil prices in April, but dropped in line with crude oil prices the first week of May. Retail price changes lag changes in wholesale gasoline prices, and Monday's retail gasoline prices would not have fully captured last week's wholesale price decline.