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 July 8, 2019. Gasoline prices rose for the second week in a row. Diesel prices also rose. On a national average basis, retail prices for gasoline rose by 3.0 cents/gallon for the week. Gasoline prices rose most significantly in the East Coast and Midwest, where supplies were affected by the closure of the Philadelphia Energy Solutions (PES) refinery. National average prices for gasoline were 11.4 cents/gallon below where they were in the same week one year ago. On a national average basis, retail prices for diesel rose by 1.3 cents/gallon. National average prices for diesel were 18.8 cents/gallon lower than they were in the same week last year.

Futures Prices and Retail Price Outlook

During the week July 1-July 5, 2019, which included the 4 of July holiday, West Texas Intermediate (WTI) crude futures fell by $1.84/b (3.1%.) Gasoline futures prices rose by 1.89 cents/gallon (1.0%.) Diesel futures prices fell by 4.3 cents/gallon (2.2%.) The loss of the PES refinery is constraining U.S. gasoline supplies, which strengthened gasoline prices relative to crude and diesel. Although the relationship between futures market prices and retail prices is not immediate and one-for-one, the most recent trend in futures prices suggests that gasoline prices will remain strong and diesel retail prices will decline in the coming week.

Retail Diesel Prices

For the current week ended July 8th, retail diesel prices rose by 1.3 cents to reach an average price of $3.055/gallon. Between mid-October and late-January, 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 since the last week of May. For the current week ended July 8, diesel prices rose in PADDs 1, 2 and 3, while falling in PADDs 4 and 5. The national average price for the week was 18.8 cents/gallon below where it was during the same week last year.

In the East Coast PADD 1, diesel prices edged up by 0.1 cents to arrive at an average price of $3.081/gallon. Within PADD 1, New England prices declined by 0.1 cents to average $3.134/gallon. Central Atlantic diesel prices rose by 0.5 cents to average $3.275/gallon. Lower Atlantic prices eased slightly by 0.1 cents to arrive at an average price of $2.940/gallon. PADD 1 prices were 15.7 cents/gallon below their prices for the same week last year.

In the Midwest PADD 2 market, retail diesel prices rose by 4.4 cents to average $2.968/gallon. This was the only significant price increase among the PADDs. Prices were 20.8 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 below $3/gallon.

In the Gulf Coast PADD 3, retail diesel prices edged up by 0.1 cents to average $2.804/gallon. PADD 3 typically has the lowest diesel prices among the PADDs. Prices were 20.0 cents lower than for the same week in the previous year.

In the Rocky Mountains PADD 4 market, retail diesel prices dropped by 1.8 cents to settle at an average of $2.980/gallon. This was the largest price decrease among the PADDs. Last week, PADD 4 joined PADDs 3 and 2 in having diesel prices below $3/gallon. PADD 4 prices were 39.0 cents lower than for the same week in the prior year.

In the West Coast PADD 5 market, retail diesel prices decreased by 0.4 cents to average $3.624/gallon. PADD 5 prices were 12.5 cents below their level from last year. Prices excluding California rose by 0.3 cents to arrive at an average of $3.208/gallon. This price was 26.3 cents below the retail price for the same week last year. California diesel prices fell by 1.0 cent to arrive at an average price of $3.953/gallon. Until the week ended June 24th, California had been the only major market where prices were above $4/gallon. California diesel prices had remained above the $4/gallon mark for nine weeks. California diesel prices were 1.7 cents lower than they were at the same week last year.

Retail Gasoline Prices

U.S. retail gasoline prices rose for the second week in a row, rising by 3.0 cents/gallon to reach an average of $2.743/gallon during the week ended July 8. Prices rose in PADDs 1, 2 and 3, and they continued to fall in PADDs 4 and 5. Retail prices for the current week were 11.4 cents per gallon lower than they were one year ago. 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, before the months of May and the June brought an easing of prices. Gasoline prices in May and June retreated by 23.3 cents per gallon. The week ended July 1st reversed that downward trend.

The increase in retail gasoline prices outpaced the increases in crude oil prices and diesel prices mainly because of the catastrophic explosion and fire at the 335,000-bpd, gasoline-maximizing Philadelphia Energy Systems (PES) refinery. The refinery owners, already under financial pressure, announced that they would not re-open the refinery. Gasoline prices rose in PADD 1 and in neighboring PADDs 2 and 3, which are sources of fuel supply to the East Coast. The fuel production and delivery system is beginning to adjust, which should moderate regional price differentials. PADD 3 gasoline output, for example, is expected to increase because of the re-start of Citgo’s catalytic cracking unit in Corpus Christi, Texas.

For the current week ended July 8th, East Coast PADD 1 retail prices for gasoline rose by 3.5 cents to average $2.661/gallon. The average price was 12.0 cents/gallon below where it was during the same week last year. Within PADD 1, New England prices rose by 0.8 cents to average $2.695/gallon. Central Atlantic market prices rose slightly by 0.1 cents to average $2.800/gallon. Prices in the Lower Atlantic market rose by 6.4 cents to average $2.565/gallon.

In the Midwest PADD 2 market, retail gasoline prices rose by 3.9 cents to arrive at an average price of $2.668/gallon. PADD 2 prices for the current week were 11.3 cents/gallon lower than they were for the same week last year.

In the Gulf Coast PADD 3 market, gasoline prices increased by 5.0 cents to average $2.418/gallon. This was the largest price increase among the PADDs. PADD 3 continues to have the lowest average prices among the PADDs. Prices for the week were 20.1 cents lower than for the same week last year.

In the Rocky Mountains PADD 4 market, gasoline pump prices fell by 2.7 cents to settle at an average price of $2.796/gallon. This was the largest price drop among the PADDs. This week’s prices were 17.0 cents lower than at the same time last year.

In the West Coast PADD 5 market, retail gasoline prices declined by 0.7 cents to arrive at an average of $3.379/gallon. PADD 5 continues to have the highest gasoline prices among the five PADDs. It is the only PADD where retail prices are above $3/gallon. Prices were 1.5 cents below last year’s level. Excluding California, West Coast prices fell by 2.3 cents to average $3.079/gallon. This price was 12.2 cents lower than at the same time last year. In California, pump prices rose by 0.6 cents to average $3.627/gallon. California prices were 7.7 cents per gallon above their levels from the same week last year.