Gasoline Prices at Summer Low before Labor Day Weekend

Heading into the Labor Day holiday weekend, U.S. retail gasoline prices have fallen for three weeks in a row, currently averaging $2.68 per gallon, the lowest level of the 2010 peak summer driving season, and the second lowest price at this point in the past five summers (Figure 1). This year, prices peaked on May 10 at $2.91 per gallon. Compared to price variation experienced over recent summers, gasoline prices have moved in a narrow range during this summer's driving season (Figure 2).

Figure1. Regular Gasoline Retail Prices around Labor Day, 2006-2010

Figure 2. Variation in retail gasoline prices over the summer driving season, 2004-2010

Most of the movement in gasoline prices this summer can be attributed to crude oil prices, which have traded within a range of about $10 per barrel (24 cents per gallon) over the period and currently stand about $72 per barrel, the lower end of that range. Global crude oil markets have been generally uneventful throughout 2010, with ample supply and a slow demand recovery in the United States and Europe (relative to more robust activity in China and other Asian countries) dampening price pressures. Exceptionally high stock levels in the United States have contributed to relatively calm market conditions this summer. U.S. commercial crude oil inventories stand at their highest level for August in nearly 20 years, and total U.S. petroleum commercial stocks (including crude oil and products) are the highest since January 1983.

Strong imports and higher refinery utilization than the past two summers have contributed to counter-seasonal summer gasoline stock builds, which have led to stock levels not seen in August since 1987. U.S. gasoline consumption has recently shown growth, with the 4-week average currently running about 2 percent higher than in the comparable year-ago period. However, it has not been sufficiently high to absorb the level of imports from countries with weaker gasoline markets.

Barring unforeseen events or a significant increase in crude oil prices, consumers may expect to see retail gasoline prices continue to soften beyond Labor Day, as gasoline demand begins its seasonal post-summer decline. Nevertheless, crude oil prices are subject to change with shifts in global market conditions. As we move into September, the potential for severe weather, particularly on the Gulf Coast, also injects a measure of unpredictability.

Gasoline and Diesel Prices Fall
The U.S. average retail price for regular gasoline dropped 2 cents to $2.68 per gallon as of August 30, 2010, seven cents higher than last year. The price has fallen more than a dime since August 9. The East Coast price declined over three cents to $2.61 per gallon while the Midwest moved a penny higher to settle at $2.64 per gallon. The Gulf Coast price was $2.53 per gallon, about four cents less than last week and the lowest in the country. The Rocky Mountain average rose a cent to $2.82 per gallon. Even though the West Coast price fell four cents to $3.04 per gallon, it continued to be the highest in the Nation. California prices declined a nickel to $3.09 per gallon.

The retail diesel fuel price decreased two cents from last week to end at $2.94 per gallon, but was $0.26 per gallon above a year ago. Although the Rocky Mountain average increased slightly, the price remained essentially unchanged at $3.02 per gallon. All other regional prices were lower than last week. The East Coast price fell two cents to an average $2.93 per gallon. The Midwest average decreased two cents to $2.91 per gallon and Gulf Coast prices were three cents lower at $2.89 per gallon. West Coast prices remained the highest in the country, but still fell a cent to $3.10 per gallon, while California prices decreased two cents to $3.15 per gallon.

Propane Inventories Move Higher
Despite relatively weak propane import levels, total U.S. inventories of propane continued to build last week, adding 1.5 million barrels to end at 62.5 million barrels. Most of the gain was experienced in the Midwest region with 0.9 million barrels of new propane inventory. The Gulf Coast region added 0.5 million barrels and the East Coast region grew by 0.1 million barrels. The Rocky Mountain/West Coast region was up slightly. Propylene non-fuel use inventories represented 4.3 percent of total propane/propylene stocks.

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