"Location, location, location" is a well-known mantra in the real estate industry. The same can be said about gasoline prices as well. As the nation's drivers approach the Independence Day holiday – a key milestone of the summer driving season – this article takes the opportunity to review developments in U.S. regional gasoline developments during the first half of 2013.
According to EIA's latest weekly survey, U.S. retail gasoline prices averaged $3.50 per gallon on Monday, July 1, up 14 cents from a year ago. However, average gasoline prices for the first half of this year are 8 cents below average prices in first-half 2012.
Wholesale conventional gasoline spot prices are down modestly across the country over the past week (Figure 1). In addition to lower crude oil prices, a major factor putting downward pressure on prices is the continued decline in gasoline consumption, which was almost 1 percent lower in January-April this year than in the comparable 2012 period (Figure 2). Despite lower demand, refinery runs remain strong as refiners seek to meet strong demand for distillate fuels in export markets. While strong runs may be driven by distillate markets, they also add to gasoline production, which given weak demand is causing a build in gasoline stocks. Gasoline inventories are well above the five-year range – both in absolute levels and on a days-of-supply basis (Figure 3) – putting additional downward price pressure on gasoline, especially along the East Coast (PADD 1), the largest demand region.
Although demand recently experienced a seasonal uptick at the start of the summer driving season, it remains low compared to recent years in absolute terms given its low starting point (below the bottom of the 2008-12 five-year range). As predicted in EIA's April Short-Term Energy Outlook Summer Fuels Outlook, the slow-growing economy, better fuel efficiency in the vehicle fleet, and potential changes in consumer behavior due to relatively high prices are curbing demand.
EAST COAST (PADD 1)
Gasoline demand has fallen more on the East Coast than in any other region, with product supplied through April (latest data available) down 237,000 barrels per day (bbl/d) – 8 percent – compared to the same period last year (Figure 4). While PADD 1 is the largest consuming region in the United States, accounting for 35 percent of U.S. demand, it accounted for almost the entire decline in demand this year. Excluding PADD 1, U.S. 2013 gasoline demand increased 175,000 bbl/d through April compared to the same period in 2012. However, PADD 1 declined 238,000 bbl/d, more than offsetting increases elsewhere. Although January-April demand in PADD 1 has fallen or held steady every year since the recession, declines since 2008 averaged 1 percent annually, rather than the larger drop-off seen so far in 2013.