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 September 23, 2019. Prices for both fuels rose significantly in response to the jump in crude prices caused by the attacks on Saudi Arabian oil facilities the prior weekend. On a national average basis, retail prices for gasoline rose by 10.2 cents/gallon for the week. National average prices for gasoline were 19.0 cents/gallon below where they were in the same week one year ago. On a national average basis, retail prices for diesel rose by 9.4 cents/gallon. National average prices for diesel were also 19.0 cents/gallon lower than they were in the same week last year.

 

Futures Prices and Retail Price Outlook

During the week from September 16-September 20, 2019, West Texas Intermediate (WTI) crude futures fell by $2.79/b (4.5%.) Gasoline futures prices rose by 6.5 cents/gallon (4.0%.) Diesel futures prices rose by 2.69 cents/gallon (1.35%.) Over the prior weekend, unmanned attacks on Saudi Arabian oil infrastructure shut in approximately 5.7 million barrels per day of crude. Futures prices soared at market opening on Monday, September 16, hitting highs above $63/b—the highest prices seen in around four months. By midweek, repairs were underway, though estimates vary about how long the repairs will take. A full restoration of production capacity should not be expected soon. Saudi Arabia calmed markets by using stored oil to meet contractual obligations. Crude prices subsided, but not to their pre-attack levels. Although the relationship between futures prices and retail prices is not immediate or one-for-one, retail prices are unlikely to backward correct to their levels of two weeks ago.

 

Retail Diesel Prices

For the current week ended September 23, retail diesel prices jumped by 9.4 cents to arrive at an average price of $3.081/gallon. Retail diesel prices had been below the $3/gallon mark for the previous five consecutive weeks. 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. For the current week ended September 23rd, diesel prices rose significantly in all PADDs. The national average price for the week was 19.0 cents/gallon below where it was during the same week last year.

In the East Coast PADD 1, diesel prices increased by 8.5 cents to arrive at an average price of $3.083/gallon. Within PADD 1, New England prices rose by 5.7 cents to average $3.070 gallon. Central Atlantic diesel prices rose by 7.5 cents to average $3.252/gallon. Lower Atlantic prices increased by 9.7 cents to reach an average price of $2.971/gallon. PADD 1 prices were 17.1 cents/gallon below their prices for the same week last year.

In the Midwest PADD 2 market, retail diesel prices rose by 11.0 cents to average $2.992/gallon. This was the largest price increase among the PADDs. Prices were 22.6 cents/gallon below their level for the same week last year. PADD 2 joined PADD 3 during the week ended June 17 in having diesel prices fall below $3/gallon. These two PADDs now are the only ones with prices remaining below the $3/gallon mark.

In the Gulf Coast PADD 3, retail diesel prices rose by 9.7 cents to average $2.858/gallon. PADD 3 typically has the lowest diesel prices among the PADDs. Prices were 19.4 cents lower than for the same week in the previous year.

In the Rocky Mountains PADD 4 market, retail diesel prices rose by 7.5 cents to arrive at an average of $3.034/gallon. PADD 4 had joined PADDs 3 and 2 in having diesel prices below $3/gallon, but prices are back above the $3/gallon mark. PADD 4 prices were 32.1 cents lower than for the same week in the prior year. This is the largest year-on-year price drop among the PADDs.

In the West Coast PADD 5 market, retail diesel prices rose by 7.6 cents to reach an average of $3.650/gallon. PADD 5 prices were 10.9 cents below their level from last year. Prices excluding California rose by 7.7 cents to arrive at an average of $3.238/gallon. This price was 23.5 cents below the retail price for the same week last year. California diesel prices increased by 7.5 cents to arrive at an average price of $3.76/gallon. Until the week ended June 24th, California had been the only major market where diesel prices were above $4/gallon, where they had remained for nine weeks. Prices are now quickly re-approaching the $4/gallon mark. California diesel prices were 1.0 cent lower than they were at the same week last year.

 

Retail Gasoline Prices

U.S. retail gasoline prices rose significantly by 10.2 cents/gallon to reach an average of $2.654/gallon during the week ended September 23. Prices rose in all PADDs and major submarkets. Retail prices for the current week were 19.0 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 and sent prices up once again.

During the first three weeks of July, gasoline prices rose by 12.5 cents/gallon. This outpaced the increases in crude oil and diesel prices mainly because of the explosion and fire at the 335,000-bpd, gasoline-maximizing Philadelphia Energy Systems (PES) refinery. Tropical Storm Barry then caused an uptick in prices. Subsequently, prices began to relax, and they fell for eight consecutive weeks beginning with the week of July 22, yielding a total price drop of 20.0 cents/gallon.

For the current week ended September 23rd, East Coast PADD 1 retail prices for gasoline rose by 8.7 cents to average $2.54/gallon. The average price was 23.2 cents/gallon below where it was during the same week last year. Within PADD 1, New England prices increased by 1.4 cents to average $2.556/gallon. Central Atlantic market prices rose by 6.7 cents to average $2.662/gallon. Prices in the Lower Atlantic market jumped by 11.7 cents to reach an average of $2.458/gallon.

In the Midwest PADD 2 market, retail gasoline prices rose by 12.9 cents to arrive at an average price of $2.585/gallon. This was the largest price increase among the PADDs. PADD 2 prices for the current week were 20.4 cents/gallon lower than they were for the same week last year.

In the Gulf Coast PADD 3 market, gasoline prices rose by 12.0 cents to average $2.353/gallon. PADD 3 continues to have the lowest average prices among the PADDs, currently 30.1 cents/gallon below the average U.S. price. Prices for the week were 20.6 cents lower than for the same week last year.

In the Rocky Mountains PADD 4 market, gasoline pump prices rose by 4.4 cents to reach an average price of $2.698/gallon. This was the smallest price increase among the PADDs. This week’s prices were 31.6 cents lower than at the same time last year.

In the West Coast PADD 5 market, retail gasoline prices rose by 8.3 cents to reach an average of $3.337/gallon. PADD 5 continues to have the highest gasoline prices among the five PADDs. It is the only PADD where retail prices continue to exceed $3/gallon. Prices were 1.3 cents below last year’s level. Excluding California, West Coast prices increased by 4.2 cents to average $3.005/gallon. This price was 12.6 cents lower than at the same time last year. In California, pump prices jumped by 11.7 cents to average $3.613/gallon. California prices were 8.6 cents per gallon above their levels from the same week last year. It is the only major U.S. submarket where prices are higher than they were one year ago.