The national average price for all formulations of regular grade gasoline sold at retail outlets across the United States is set to decline for the first time since the start of February, pressured by lower wholesale costs as refineries near the end of seasonal maintenance while climbing domestic crude production lifts supply in the Gulf Coast to a record high.
The Energy Information Administration’s US average for retail gasoline has increased for 12 consecutive weeks through Apr. 28, pushing the national price 42.1cts or 12.8% higher since Feb. 3 to $3.713 gallon. The average is at its highest point since Mar. 4, 2013, while 19.3cts more versus the comparable year-ago period.
In paper trading, gasoline futures slid to a one-month low below $2.90 gasoline in early May while secondary market wholesale costs at major metropolitan markets declined through the week ended May 5. Double-digit declines were registered in California, where refiners are returning units to service after an extensive turnaround season.
A higher run rate at US refineries, which ran at 91% of capacity in late April, means more gasoline.
Domestic crude supply continues to grow, now at its highest point since 1931 per EIA, driven higher on greater US production amid the boom in shale oil, with output at 8.352 million bpd in late in April. Oil production in the Bakken region of North Dakota topped one billion bbl during the first quarter.
New pipeline capacity came online in the first quarter, increasing the supply of domestic crude that reaches the Gulf Coast. Crude supply for the Gulf Coast has moved to a record high at 215.3 million bbl EIA shows amid the combination of the new supply line and seasonal refinery maintenance, pressuring crude values.
Retail gasoline prices are likely to find upside pricing support this summer, with demand for gasoline the highest during the warm weather months. Plans to create the country’s first strategic gasoline reserve this year would add to this demand.
On May 2, US Energy Secretary Ernest Moniz announced the creation of the first federal regional reserve for gasoline, with the action taken in response to Superstorm Sandy that devastated the Northeast region nearly two years ago.
“Based on the Energy Department’s lessons learned from the major fuel supply disruption in the aftermath of the storm, the DOE will establish two Northeast reserve locations near New York Harbor and in New England,” Moniz said in a news release announcing the plan.
In 2012, Superstorm Sandy caused heavy damage to two refineries, and more than 40 terminals in the New York Harbor were closed due to water damage and loss of power.
Each location will store 500,000 bbl of gasoline, seen as enough to provide some short-term relief in the event of significant disruptions. The Department of Energy said it anticipates launching the reserve by late summer, including awarding contracts for product acquisition.