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 December 16th, 2019. Prices declined for both fuels. Gasoline prices fell by 2.5 cents/gallon, while diesel prices eased modestly by 0.3 cents/gallon. The national average price for gasoline was $2.536/gallon, which was 16.7 cents/gallon above the price for the same week one year ago. Until three weeks ago week, gasoline prices had been below their levels from last year. On a national average basis, the retail price for diesel averaged $3.046/gallon, which was 7.5 cents/gallon lower than the price in the same week last year.

Futures Prices and Retail Price Outlook

During the week December 9-December 13, 2019, West Texas Intermediate (WTI) crude oil futures prices rose by $0.25/barrel (0.4%.) Gasoline futures prices fell by 1.5 cents/gallon (0.9%.) Diesel futures prices remained essentially flat. However, by the end of the week, the U.S. announced that a phase-one agreement had been reached in the ongoing U.S.-China trade war. Equities and commodities prices rose on the news. As of the time of this writing on December 17, WTI crude futures prices have reclaimed the $60/b level, and gasoline and diesel futures prices are rising also. While the relationship between futures prices and retail prices is not immediate or one-for-one, gasoline and diesel retail prices are likely to rise in the coming week. The phase-one agreement has not been finalized, but the agreement in principle forestalled the next round of U.S. tariffs, reduced some of the existing tariffs, and required China to purchase additional U.S. agricultural and energy products in 2020.

Retail Diesel Prices

For the current week ended December 16th, retail diesel prices eased slightly by 0.3 cents to arrive at an average price of $3.046/gallon. Retail diesel prices had been below the $3/gallon mark until the attacks on Saudi Arabian oil facilities in mid-September, but they have remained steadily above the $3/gallon mark since then. Leading up to this event, between mid-October 2018 and late-January 2019, retail diesel prices fell for fourteen consecutive weeks. During those fourteen weeks, the price decline totaled 42.9 cents/gallon. From February through April, diesel prices crept back up by 20.4 cents/gallon. The month of May brought a modest reversal in the upward trend in diesel prices. During the five weeks of June including the week ended July 1st, diesel prices fell more substantially, declining by 10.9 cents/gallon. For the current week ended December 16, diesel prices rose in PADDs 1, 2 and 3, while falling in PADDs 4 and 5. The national average price for the week was 7.5 cents/gallon below where it was during the same week last year.

In the East Coast PADD 1, diesel prices increased by 0.3 cents to arrive at an average price of $3.053/gallon. Within PADD 1, New England prices declined by 0.2 cents to average $3.083/gallon. Central Atlantic diesel prices also declined by 0.2 cents to average $3.239/gallon. Lower Atlantic prices rose by 0.7 cents to arrive at an average price of $2.921/gallon. PADD 1 prices were 11.2 cents/gallon below their levels for the same week last year.

In the Midwest PADD 2 market, retail diesel prices rose by 0.4 cents to average $2.970/gallon. Prices were 4.8 cents/gallon below their level for the same week last year. PADD 2 joined PADD 3 during the week ended June 17th in having diesel prices fall below $3/gallon. These two PADDs remain the only ones with prices below the $3/gallon mark.

In the Gulf Coast PADD 3, retail diesel prices rose by 0.4 cents to arrive at an average of $2.763/gallon. PADD 3 continues to have the lowest diesel prices among the PADDs, currently 28.3 cents below the U.S. average. Prices were 13.7 cents lower than for the same week in the previous year.

In the Rocky Mountains PADD 4 market, retail diesel prices dropped by 4.6 cents to settle at an average of $3.161/gallon. This was the largest price drop among the PADDs. PADD 4 prices were 1.7 cents lower than for the same week in the prior year.

In the West Coast PADD 5 market, retail diesel prices fell by 3.1 cents to average $3.616/gallon. PADD 5 prices were 1.2 cents above their level from last year. PADD 5 is the only district where diesel prices are higher than they were in the same week last year. Prices excluding California fell by 4.3 cents to arrive at an average of $3.280/gallon. This price was 3.3 cents below the retail price for the same week last year. California diesel prices fell by 2.2 cents to arrive at an average price of $3.882/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 continued to ease since then. California diesel prices were 4.7 cents higher than they were at the same week last year.

Retail Gasoline Prices

U.S. retail gasoline prices fell by 2.5 cents to average $2.536/gallon during the week ended December 16. Prices fell in all PADDs except for the Gulf Coast PADD 3. Retail prices for the current week were 16.7 cents per gallon higher than they were one year ago. The past three weeks may have marked a turning point if price strength continues, because before then, gasoline prices had been below their levels of last year.

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.

For the current week ended December 16th, East Coast PADD 1 gasoline retail prices fell by 2.0 cents to settle at an average of $2.458/gallon. The average price was 10.6 cents/gallon above where it was during the same week last year. Within PADD 1, New England prices edged up by 0.1 cent to average $2.524/gallon. Central Atlantic market prices declined by 0.4 cents, settling at an average of $2.590/gallon. Prices in the Lower Atlantic market dropped by 3.5 cents to average $2.358/gallon.

In the Midwest PADD 2 market, retail gasoline prices fell by 3.3 cents to average $2.391/gallon. PADD 2 prices for the current week were 25.6 cents/gallon higher than they were for the same week last year.

In the Gulf Coast PADD 3 market, gasoline prices rose by 2.5 cents to average $2.228/gallon. This was the only price increase among the PADDs. Nonetheless, PADD 3 continues to have the lowest average prices among the PADDs, currently 30.8 cents/gallon below the average U.S. price. Prices for the week were 19.7 cents higher than for the same week last year.

In the Rocky Mountains PADD 4 market, gasoline pump prices fell by 6.1 cents to settle at an average price of $2.730/gallon. This week’s PADD 4 prices were 15.5 cents higher than at the same time last year.

In the West Coast PADD 5 market, retail gasoline prices dropped significantly by 6.3 cents to settle at $3.274/gallon. This was the largest price decline among the PADDs. Prices excluding California fell by 5.6 cents to average $3.007/gallon, which was 8.7 cents/gallon above last year’s price. California prices dropped sharply by 7.2 cents to average $3.508/gallon. California prices rose dramatically in late September and early October, hitting levels above $4/gallon, and recently prices have been retreating. California prices were 23.7 cents per gallon above their levels from the same week last year. Until four weeks ago, PADD 5 had been the only PADD where prices were higher than they were one year ago. During the week ended December 16th, average retail gasoline prices in all PADDs were higher than they were last year.