The U.S. average retail price for a gallon of regular gasoline has fallen for six consecutive weeks since hitting its 2013 year-to-date peak of $3.78 per gallon in late February. Early in 2013, increasing crude oil prices and strong seasonal crack spreads led to an increase in retail gasoline prices. However, in recent weeks, both of those pressures have abated, and retail prices have declined to $3.61 per gallon. In the April 2013 Short-Term Energy Outlook (STEO), EIA projects that for the summer (April through September) driving season, regular-grade gasoline retail prices will average $3.63 per gallon, similar to the current price level. Last summer that average was $3.69 per gallon. Daily and weekly national average prices can differ significantly from monthly and seasonal averages, and there are also significant regional differences, with prices in some areas exceeding the national average by 25 cents per gallon or more.
The average retail price for regular gasoline is expected to increase to an average of $3.69 per gallon in May, then fall gradually through the summer (Figure 1). Most of the increase from the current price level is attributable to an increase in crack spreads as result of typical seasonal factors such as the switch to summer-grade gasoline, which is more costly to produce (a crack spread is the difference between the cost of crude oil and the wholesale price of the refined product). After averaging 23 cents per gallon in first quarter 2013, gasoline crack spreads based on Brent are expected to increase to an average of 40 cents per gallon in the second quarter, peaking at 42 cents per gallon in May. The refiner price of gasoline for resale (wholesale) is expected to increase six cents per gallon from the first to second quarter, which combined with decreasing projected prices for Brent crude, lead to the higher expected crack spread. As refinery runs increase from the second quarter to the third quarter, wholesale gasoline prices are expected to fall about 8 cents per gallon, pushing crack spreads down to a third-quarter average of 35 cents per gallon.
While the gasoline crack spread is the major driver of seasonality in the retail gasoline price forecast, crude oil prices remain the largest source of uncertainty for gasoline price levels this summer. Brent crude oil prices averaged $112.51 per barrel in first-quarter 2013. Despite declining to as low as $104 per barrel on April 5, Brent prices are expected to average $108 per barrel and $107 per barrel in the second and third quarters, respectively.