No break in fuel prices anytime soon

Apr 13, 2012
by WLJ

During the April-through- September summer driving season this year, regular gasoline retail prices are forecast to average about $3.95 per gallon, peaking in May at a monthly average price of $4.01 per gallon. The U.S. Energy Information Administration (EIA) expects regular gasoline retail prices to average $3.81 per gallon in 2012 and $3.73 per gallon in 2013, compared with $3.53 per gallon in 2011.

Diesel fuel prices, which averaged $3.94 per gallon last summer, are projected to average $4.21 per gallon this summer, with monthly prices peaking at $4.25 per gallon in the middle of the driving season.

Because taxes and retail distribution costs are generally stable, movements in gasoline and diesel prices are driven primarily by changes in both crude oil prices and wholesale margins. The retail price projections reflect higher prices for the average refiner acquisition cost of crude oil, which averages about $114 per barrel ($2.71 per gallon) this summer compared with the $104 per barrel ($2.48 per gallon) average of last summer. Crude oil prices that differ from our forecast would be reflected in the price of motor fuels. Each dollar per barrel of sustained change in crude oil prices relative to the forecast translates into approximately a 2.4-cent-per-gallon change in product prices, absent the consideration of factors specific to the gasoline and diesel fuel markets.

EIA expects wholesale gasoline margins (the difference between the wholesale price of gasoline and the refiner acquisition cost of crude oil) will average 56 cents per gallon this summer, about the same as last summer, but 8 cents per gallon higher than the previous five-summer average of 48 cents per gallon (U.S. Gasoline and Crude Oil Prices Chart). Forecast wholesale diesel margins are 1 cent per gallon above last summer’s level and 10 cents per gallon higher than the previous five-summer average of 54 cents per gallon.

EIA has lowered the forecast 2012 average U.S. refiner acquisition cost of crude oil by $2 per barrel from last month’s Outlook to $112 per barrel, still $10 per barrel higher than last year’s average price. EIA expects the price of West Texas Intermediate (WTI) crude oil to average about $106 per barrel in 2012, the same as in last month’s Outlook but $11 per barrel higher than the average price last year. Constraints in transporting crude oil from the U.S. midcontinent region contribute to the expected discount for WTI relative to other world crude oil prices. EIA expects WTI prices to remain relatively flat in 2013, averaging about $106 per barrel, while the average U.S. refiner acquisition cost of crude oil averages $110 per barrel.

The warmer than normal weather this past winter contributed to high natural gas working inventories that continue to set new record seasonal highs, with March 2012 ending at an estimated 2.48 trillion cubic feet, about 57 percent above the same time last year. EIA’s average 2012Henry Hub natural gas spot price forecast is $2.51 per million British thermal units (MMBtu), a decline of $1.49 per MMBtu from the 2011 average spot price. EIA expects that Henry Hub spot prices will average $3.40 per MMBtu in 2013.. — WLJ