Despite the recent increases in wholesale and retail gasoline prices, there are indications that gasoline crack spreads are beginning to ease. Both RBOB futures and Brent spot prices have declined in recent days, with a larger decrease in the former (Figure 3). Additionally, trade press has reported that 11 million barrels of waterborne gasoline are en route to the United States and Canada. U.S. refinery maintenance typically peaks in February, and we expect that many of the facilities that have recently decreased crude runs should return to normal operations in the coming weeks. However, this increased supply will likely be countered by the seasonal increase in demand, which typically begins in the spring.
Even though pressure on gasoline crack spreads appears to be easing, the short-term outlook for gasoline prices remains volatile. Despite the significant rise in retail gasoline prices since the start of the year, a part of the even steeper rise in wholesale prices has not yet been fully reflected in pump prices. Thus, if wholesale prices were to remain steady rather than decline, a modest further increase in pump prices would be expected. Gasoline pump prices will also be affected by the transition to summer-grade gasoline, which is more expensive to produce than winter-grade gasoline. Gasoline crack spreads will also remain sensitive to future refinery outages. Finally, although this article focuses on crack spreads, crude oil prices are also subject to significant uncertainty and volatility related to economic and geopolitical factors.
Gasoline and diesel fuel prices up again
The U.S. average retail price of regular gasoline increased 14 cents to $3.75 per gallon, up 16 cents from last year at this time. The national average price has seen double digit increases two out of the last three weeks and is up 45 cents since the beginning of the year. The largest increase came in the Midwest, where the price increased 18 cents to $3.76 per gallon. The Gulf Coast price is $3.53 per gallon, an increase of 15 cents from last week. The Rocky Mountain price is up 14 cents to $3.41 per gallon. On the West Coast, the price increased 11 cents, but remains just shy of the $4 per gallon mark at $3.97 per gallon. Rounding out the regions, the East Coast price saw the smallest increase, 10 cents, rising to $3.75 per gallon.
The national average diesel fuel price increased five cents to $4.16 per gallon, 20 cents higher than last year at this time. For the first time since October 2012, prices in all regions of the nation are above the $4 per gallon mark. The Gulf Coast and Rocky Mountain prices both increased seven cents, to $4.07 per gallon and $4.03 per gallon, respectively. The Midwest and East Coast prices are each up a nickel to $4.13 per gallon and $4.20 per gallon, respectively. Rounding out the regions, the West Coast price is $4.30 per gallon, up four cents from last week.