As summer driving season fast approaches, US gasoline consumers will experience slightly lower prices at the pump than last summer. In its recently released Summer Fuels Outlook, the US Energy Information Administration expects that the regular-grade gasoline retail price will average $2.76/gal for this year’s summer driving season, down from last summer’s driving season average of $2.85/gal.
The retail gasoline price will be lower largely in part because of the forecasted lower Brent crude oil price vs. last summer. Price fluctuations in retail gasoline and diesel pump prices are mostly caused by changes in crude oil prices, as taxes and distribution costs primarily remain constant. Brent crude prices, as forecasted by EIA analysts, will average $67/bbl during the summer driving season, while last summer they averaged $75/bbl.
EIA expects gasoline pump prices to rise to $2.74/gal in April, peak in June at $2.83/gal, and then slowly drop to $2.66/gal in September, the official end of the US driving season. The gasoline crack spread (the difference between the wholesale price of gasoline and the Brent crude oil price) will average 41¢/gal this summer, according to EIA. Because US gasoline inventories are expected to remain high this summer, the gasoline crack spread would be 6¢/gal higher than last summer but 3¢/gal lower than the 5-summer average from 2014-18.
Supply, demand
In January, gasoline inventories surpassed the 5-year January average by 11.2 million bbl. “As a result, EIA’s gasoline crack spreads averaged 9¢/gal in January and February, the lowest level during those months since 2014. However, inventory levels recently fell to about 4 million bbl above the 5-year average, putting significant upward pressure on wholesale gasoline margins, and March margins averaged 34¢/gal. The increase from February to March was the largest increase in wholesale gasoline margins for March since at least 1994, but margins in March were still 3¢/gal lower than the 5-year average.”
Production of motor gasoline in the US will be 80,000 b/d higher than last summer, including gasoline blendstock production. The US will be a net exporter of total motor gasoline, including blending components, according to EIA forecasters. The US is expected to export an average of 87,000 b/d of motor gasoline during the summer driving season. This would be the first time since 1960 that the US will be a net exporter during the summer months for motor gasoline.
Summer motor gasoline consumption will average 9.5 million b/d compared with last summer. EIA states that this is up 0.3%, or 29,000 b/d, from year-ago levels and relatively the same as the record-setting average set in the summer of 2017. Current stock levels average 229.1 million bbl for the start of April, down 4.1% from year-ago levels. Stocks, however, are expected to rise to 232 million bbl at the end of the summer driving season. This is lower than last summer’s level by 7.6 million bbl.
Diesel
EIA forecasts retail diesel prices to average $3.09/gal, down 4% from last summer’s average of $3.22/gal, but higher than the 5-year average of $2.95/gal. Wholesale diesel fuel margins for this summer are forecasted to average 48¢/gal, slightly higher than last summer. Because of the growth in both US and global distillate consumption, diesel crack spreads are expected to be higher than in recent years.
Consumption of distillate fuel averages 4.1 million b/d, up 20,000 b/d over last summer’s driving season. Distillate consumption in the summer of 2018 was the highest rate since 2007. Inventories of distillate will rise during the summer, preparing for the winter heating season, building by an average of 51,000 b/d. End-of-summer stocks will roughly be 137.2 million bbl compared with last summer. EIA projects that the US will also be a next exporter of distillate fuel, which will average 1.3 million b/d, slightly higher than last summer.
