Analysis by Dr. Nancy Yamaguchi

The U.S. Energy Information Administration (EIA) released its weekly data on diesel and gasoline retail prices for the week ended April 20, 2020. Demand destruction caused by the COVID-19 pandemic continues to force prices down. Retail prices for gasoline and diesel both fell once again. Diesel prices fell by 2.7 cents/gallon. Gasoline prices fell by 4.1 cents/gallon. The national average price for gasoline fell further below the $2/gallon threshold, averaging $1.812/gallon. This price was an incredible $1.029/gallon below the price for the same week one year ago. In February, just two months ago, retail prices for gasoline were higher than they had been a year earlier. Prices in four of the five PADDs have fallen below the $2/gallon level, with only the West Coast PADD 5 having retail prices above $2/gallon. From late-November through early March, gasoline prices had been above their levels from last year. Prices declined until, during the week ended March 2nd, retail gasoline prices were a mere 0.001 cent/gallon above last year’s level. The dramatic price declines since then have brought gasoline prices significantly below their levels of last year.

Diesel prices also had been above last year’s level, but prices are now well below their levels of last year. On a national average basis, the retail price for diesel averaged $2.48/gallon. This was 66.7 cents/gallon lower than the price in the same week last year. Retail prices for diesel have now fallen for fifteen consecutive weeks, shedding a total of 59.9 cents/gallon.

Collapse of Futures Prices, and Retail Price Outlook

During the week April 13, 2020 to April 17, 2020, West Texas Intermediate (WTI) crude oil futures prices fell each day, and crude prices ended the week down by $4.60 (18.7%.) Seeing WTI crude futures prices below $20/b seemed extraordinary enough, but the truly shocking development did not emerge until Monday, April 20, when ideas about futures trading in oil were changed forever: WTI crude futures for the forward month of May 2020 closed at negative $37.63/b—an historically unprecedented event. The bargain struck by the last trader yesterday was no longer an issue of “how much will you give me for this?” but “how much must I pay to have you deal with this?” The COVID-19 pandemic has cut demand so drastically that storage is nearly full, and producers are still sending out cargoes, leaving traders scrambling to dispose of May delivery contracts. June delivery contracts remained in the $20-22/b range Monday, allowing many to conclude that this was closer to the “true” value of WTI crude. However, the difficulty of disposing of May contracts is now feeding into the value of June contracts, which currently have fallen below $15/b.

During the week of April 13-17, 2020, gasoline futures prices declined by 1.94 cents/gallon (2.6%.) Diesel futures prices slid by 5.57 cents/gallon (5.5%.) These are modest declines in light of the collapse of crude futures. However, both gasoline and diesel futures prices are currently heading down. While the relationship between futures prices and retail prices is not immediate or one-for-one, global oversupply is exerting continual downward pressure on oil prices, and this is likely to extend the downward trend in gasoline and diesel retail prices in the coming week.

Retail Diesel Prices

Retail prices for diesel have now fallen for fifteen consecutive weeks—every week this calendar year since the first week of January. Prices have fallen by a cumulative 59.9 cents/gallon. Retail diesel prices had been below the $3/gallon mark until the attacks on Saudi Arabian oil facilities in mid-September 2019. They rose at that time, and they remained above the $3/gallon mark until the week ended February 3, 2020. Prices have continued to slide. For the current week ended April 20th, retail diesel prices declined by 2.7 cents to settle at an average price of $2.480/gallon. For the current week ended April 20th, diesel prices fell in all PADDs countrywide. The national average price for the week was 66.7 cents/gallon below where it was during the same week last year.

In the East Coast PADD 1, diesel prices fell by 2.3 cents to settle at an average price of $2.576/gallon. Within PADD 1, New England prices declined by 0.6 cents to average $2.709/gallon. Central Atlantic diesel prices fell by 3.5 cents to average $2.747/gallon. Lower Atlantic prices decreased by 1.6 cents to an average price of $2.434/gallon. PADD 1 prices were 59.8 cents/gallon below their levels for the same week last year.

In the Midwest PADD 2 market, retail diesel prices fell by 2.7 cents to average $2.326/gallon. Prices were 71.6 cents below their level for the same week last year. PADD 2 joined PADD 3 during the week ended June 17, 2019, in having diesel prices fall below $3/gallon, and the retail price of diesel in PADD 2 has not regained the $3/gallon level since then. Prices subsequently fell below $3/gallon in PADD 4 and PADD 1. Until this week, PADD 5 had been the only region where diesel prices had remained above $3/gallon.

In the Gulf Coast PADD 3, retail diesel prices fell by 1.7 cents to arrive at an average of $2.272/gallon. PADD 3 continues to have the lowest diesel prices among the PADDs, currently 20.8 cents below the U.S. average. Prices were 64.5 cents below their level for the same week in the previous year.

In the Rocky Mountains PADD 4 market, retail diesel prices fell by 2.6 cents to settle at an average of $2.471/gallon. PADD 4 prices were 67.2 cents lower than for the same week in the prior year.

In the West Coast PADD 5 market, retail diesel prices dropped by 5.4 cents to average $3.028/gallon. This was the largest price drop among the PADDs, and it sufficed to bring PADD 5 prices below the $3/gallon level. PADD 5 prices were 72.2 cents below their level from last year. Until December 2019, PADD 5 had been the only district where diesel prices were higher than they were in the same week last year. Subsequently, prices rose until this was true in all other PADDs. However, prices have been falling dramatically, and the national average price is now well below its level of last year. PADD 5 prices excluding California fell by 5.5 cents to settle at an average of $2.640/gallon. This price was 66.9 cents below the retail price for the same week last year. California diesel prices dropped by 5.4 cents to settle at an average price of $3.248/gallon. Until the week ended June 24th, California had been the only major market where diesel prices were above $4/gallon, where they had been for nine weeks. California prices retreated below $4/gallon from July through October, rose above $4/gallon again during the first three weeks of November, and eased since then. California diesel prices were 75.5 cents lower than they were at the same week last year.

Retail Gasoline Prices

The COVID-19 pandemic continued to drive down U.S. retail gasoline prices, which submerged below the $2/gallon threshold during the week ended April 6. Prices continued to slide this week. Average retail prices dropped by 4.1 cents/gallon to average $1.812/gallon during the week ended April 20th. Prices fell in all PADDs. Retail gasoline prices for the current week were an amazing $1.029 cents per gallon lower than they were one year ago. Until November, gasoline prices had been below their levels of last year. Prices then rose to surpass last year’s levels in all PADDs. The current downhill price slide has changed this, making gasoline a bargain—if you need it. It has been over four years since the average retail price for gasoline was below the $2/gallon mark.

Gasoline prices hit a peak of $2.903/gallon during the week ended October 8, 2018. Prices then slid downward for fourteen weeks in a row, shedding a total of 66.6 cents per gallon. In the next seventeen weeks, prices marched back up by 66.0 cents/gallon. Prices came very close to the peak they hit in early October. However, the months of May and the June brought an easing of prices amounting to 23.3 cents per gallon. The week ended July 1st reversed that downward trend and sent prices up once again. The recent drop in crude prices is pulling gasoline prices down, and the COVID-19 pandemic is causing a severe contraction in demand as people shelter-in-place. It is unclear how much this week’s collapse in WTI crude futures prices will filter down to retail fuel prices.

For the current week ended April 20th, East Coast PADD 1 gasoline retail prices fell by 3.4 cents to arrive at an average of $1.844/gallon. Three weeks ago, PADD 1 joined PADDs 2 and 3 in having retail prices drop below the $2/gallon line. The average price was 88.9 cents/gallon below where it was during the same week last year. Within PADD 1, New England prices declined by 2.6 cents to average $1.861/gallon. Central Atlantic market prices fell by 3.4 cents, arriving at an average of $2.046/gallon. Prices in the Lower Atlantic market fell by 3.3 cents to average $1.712/gallon.

In the Midwest PADD 2 market, retail gasoline prices fell by 4.1 cents to average $1.510/gallon. For the past four weeks, PADD 2 prices have been below prices in the U.S. Gulf Coast PADD 3 market, a rare occurrence. PADD 2 prices for the week were an incredible $1.212/gallon lower than they were for the same week last year.

In the Gulf Coast PADD 3 market, gasoline prices dropped by 3.2 cents to average $1.544/gallon. Five weeks ago, PADD 3 was the first to break the $2/gallon barrier, joined by PADD 2, then by PADD 1, and then by PADD 4. PADD 3 usually has the lowest average prices among the PADDs, but prices in PADD 2 have fallen sharply over the past four weeks, and PADD 2 prices are now the lowest in the land. PADD 3 prices for the week were a hefty 99.1 cents lower than for the same week last year.

In the Rocky Mountains PADD 4 market, gasoline pump prices dropped by 5.5 cents, settling at an average price of $1.866/gallon. This week’s PADD 4 prices were 89.3 cents lower than at the same time last year.

In the West Coast PADD 5 market, retail gasoline prices dropped by 6.5 cents to average $2.515/gallon. This was the largest price drop among the PADDs. PADD 5 typically has the highest retail prices for gasoline, and until mid-March it had been the only PADD where retail gasoline prices stayed above $3/gallon. Prices this week were $1.114/gallon lower than last year’s price. Prices excluding California fell by 8.1 cents to average $2.296/gallon, which was 94.7 cents/gallon below last year’s price. California prices fell by 5.1 cents to average $2.700/gallon. California had been the last state where gasoline prices had remained above the $3/gallon line, but this changed the week ended March 30. On Thursday March 19, California led the U.S. by taking the dramatic step of ordering a statewide shelter-in-place to combat the spread of COVID-19. This order is affecting approximately 40 million people, and it is causing a dramatic drop in gasoline demand, as well as demand for other fuels including jet fuel and diesel. California retail gasoline prices were a massive $1.248 per gallon below their levels from the same week last year.