Pandemic recovery and the resulting increase in global petroleum consumption, coupled with increased geopolitical tension with Russia, have led to declining oil stocks and a steady rise in crude oil and petroleum product prices and market volatility that will likely impact the summer driving season.
Analysis of the US summer driving season is the basis of the US Energy Information Administration’s (EIA) April release of its annual Summer Fuels Outlook. Summer driving season begins in April and continues through September.
Gasoline
During the summer driving season, consumers will pay an average $3.84/gal for regular-grade gasoline—the highest since 2014 (inflation adjusted)—resulting in US household spend of nearly $500 more than in 2021. An increase of almost 18%, consumers will spend nearly $2,950 filling their tanks in 2022. EIA forecasts prices to range “from a high of $4.67/gal on the West Coast to a low of $3.48/gal on the Gulf Coast.”
Crude oil prices account for the largest share—61%—of the cost of a gallon of gasoline, and those prices have continued to increase with Russia’s continued war in Ukraine. With increasing global economic growth and an increase in oil consumption, prices will remain high. This summer, Brent crude is expected to average $106/bbl, an increase of $35/bbl over last summer, but down from an average $117 in March 2022. It remains to be seen how oil markets will respond—moving prices higher or lower—as the war in Ukraine continues, pandemic worries ebb and flow, and strategic crude stocks are released.
Consumption is expected to be higher than last summer, with more travel during the summer driving season as Americans plan summer vacations and return to offices as effects of the pandemic on gasoline consumption decline and US employment continues to rise, said EIA, noting it expects gasoline consumption to average 9.2 million b/d, up 0.8% from last summer but down from 9.5 million b/d in 2019. Consumption is expected to top 9.4 million b/d in July.
US gasoline stocks on Apr. 1 totaled 236.8 million bbls, 900,000 b/d less than a year ago. By summer’s end, stocks will be 6.5 million b/d higher than last year.
Refining margins will average 47¢/gal during the summer months, 8¢/gal lower than a year ago. EIA predicts “higher than average margins because of reduced US refinery capacity compared with 2019 and low gasoline inventories in certain US regions during the first half of the summer (2Q22).”
Diesel fuel
Diesel consumption has continued at a steady pace and remained strong during the pandemic. Consumption of diesel fuel will increase by 90,000 b/d over 2021, reaching 3.9 million b/d this summer.
Production of distillate fuel by refiners and blenders is expected to average 5.4 million b/d during the summer months, rising 610,000 b/d from 2021. Biodiesel production is expected to reach 100,000 b/d, slightly lower than last summer. Renewable diesel production, consumed primarily in California, will average 90,000 b/d, up 40,000 b/d from 2021. Net distillate exports will average 1.3 million b/d, a 360,000 b/d jump from a year ago.
US diesel fuel margins will average 82¢/gal this summer, 40¢/gal lower than last summer. As a large distillate fuel producer and exporter, the absence of Russian supplies will keep margins higher and increase refinery runs.
Retail diesel prices are forecast to average $4.57/gal, an increase of $1.29/gal over last year. Diesel prices this year are the highest since 2014.
Distillate inventories as of Apr. 1 were 114.3 million bbl, compared with 145.5 million last summer, down 21%.
Market uncertainty is likely to play a large role in gasoline and diesel fuel prices US consumers will encounter at the pump this summer.
About the Author
Laura Bell-Hammer
Statistics Editor
Laura Bell-Hammer has been the Statistics Editor for the Oil & Gas Journal since 1994. She was the Survey Editor for two years prior to her current position with OGJ. While working with OGJ, she also was a contributing editor for Oil & Gas Financial Journal. Before joining OGJ, she worked for Vintage Petroleum in Tulsa, gaining her oil and gas industry knowledge.