• Average U.S. prices will be close to the present level of $3.68/gal, with about $1/gal of diversity separating the lowest and highest state averages.
• In the lower 48 states, almost every county finds at least 20cts/gal separating leading edge numbers and average prices. Motorists who download the free GasBuddy app can quickly locate the most competitively priced stations.
• Cheap prices thanks to the U.S. oil shale boom show up in Rocky Mountain states and the Dakotas. Utah gasoline sells on average at prices more than 10cts/gal below Independence Day 2013 levels and 4-8cts/gal price breaks are common in the Dakotas, Wyoming, Idaho, Montana, and Colorado. Refineries in some of these states have access to crude that sells at discounts of more than $25 barrel below global crude oil prices.
• Demand during the summer looks to be brisk, but it will be hard-pressed to match last year’s consumption rate. Year-to-date, U.S. motor fuel demand has averaged about 365-million gallons per day, up about 1.7% from the same period in 2013. Early July days bracketing the holiday might see demand match last year’s robust rate of 390-million gallons of consumption, but lower demand looms through most of 2014 thanks to less driving by millennials and an increasingly more efficient, light vehicle fleet.
• GasBuddy estimates that Americans are likely to pay about $1.435-billion per day for gasoline during the holiday week, about $50-million more each day, or $350-million more per week than last year. Thanks to lower demand and lower prices however, that is still about $200-million per day less than the record 2008 numbers.
• High ethanol prices contributed to higher retail gas prices in late March and early April, but ethanol prices have tilted well below gasoline values more recently. Wholesale prices for ethanol are currently about 80cts/gal below gasoline blendstock prices, and most areas find a finished motor fuel formula of 90% hydrocarbon and 10% alcohol (ethanol). Not accounting for taxes, subsidies, or performance, adding ethanol to the gasoline mixture currently cuts the finished fuel price by about 5-8cts/gal.
• Fund money, whether from very speculative or conservative financial entities, has been heavily bet on higher crude oil prices. GasBuddy estimates that there is about $50-billion more money bet on higher prices for crude, just in the NYMEX WTI contract. This is a record amount by all accounts.
• Wholesale gasoline prices in most cases are now just 3-10cts gal higher than they were when Mosul fell, but there are notable exceptions. California gasoline costs distributors and dealers about 20cts gal more than it did on June 10 thanks to local refinery glitches. Chicago gasoline costs are down by 9-11cts gal in the last two weeks, as refinery problems along the Great Lakes have largely been solved.
• The most expensive markets for gasoline should be in areas that require reformulated motor fuel. Because of much more stringent summertime blending standards, the cost of reformulated gasoline is often 12-20cts gal more expensive than conventional blends. Along with metropolitan tax burdens, this explains why rural areas of New York, Illinois, Kentucky, Virginia, Texas and other states can have pump prices regularly 20-40cts gal below those seen in cities.
• California prices averaged just under $3.95 gal for the first half of 2014, and will hover around $4.10 gal for the holiday period. All of 2012 produced a $4.03 gal annual average and that included an all-time high of $4.67 gal on October 9.
• In contrast, some states have had very palatable motor fuel prices Montana’s average price of $3.266 gal so far in 2014 puts that state below long time fuel price leading states such as South Carolina ($3.29 gal) and Oklahoma ($3.314 gal).
• Diesel prices have averaged $3.9377 gal so far in 2014, and this is the product that could get the most lift from higher global crude prices. Prospects for another expensive winter (for heating oil customers) loom large.
• The U.S. has added 356,000 barrels per day of new crude production in 2014 and that pace will quicken through the summer. GasBuddy projects that U.S. crude output (currently measured at just under 8.5-million barrels per day) will soon rise to where it is 3-million barrels per day higher than where U.S. production stood when Libyan output vanished in early 2012.
• The big risk for 2014 gasoline prices still looms in the form of tropical weather in midsummer. The U.S. has added refining capacity at the Gulf Coast in each of the last five years, but we are now exporting record amounts of diesel and gasoline. Export requirements could complicate smooth supply should storms impact Texas, Louisiana, and Mississippi refineries.
• Who’s doing well? Crude oil production companies and refiners have had a very profitable quarter. Independent distributors, dealers, and even large public c-store chains have seen thin spring margins narrow further, thanks to street prices not keeping up with wholesale cost increases.
Media Coordinator, Gasbuddy.com