The national average price of gas declined slightly on the week, and it is possible that prices have begun to stabilize has refineries increase production to meet record-high demand. Today’s average price of $2.21 per gallon represents an increase of 17 cents per gallon on the month, and prices have moved higher for 23 of the past 31 days. Despite this recent trend higher, retail averages are down by one cent per gallon on the week, and drivers continue to benefit from year-over-year discounts, saving 45 cents per gallon on the year.
According to the latest data from the U.S. EIA, total U.S. gasoline supplies are at their highest levels to start May on record. Historically gasoline demand increases leading into the summer driving season, and this year so far is no different. However, lower gas prices are contributing to drivers taking to the roads at record levels and the 2016 summer driving season is expected to rival 2007 when gasoline demand hit an all-time high.
Gasoline demand reached its fourth-highest weekly estimate for 2016 and remains well above year-over-year levels. Although the market is well supplied with product, the notable growth in gasoline demand could cause pump prices to become volatile leading into the summer driving season. Refineries nationwide are ramping up production, which should help increase supplies in regional markets. This is good news for the average driver, because if supply can keep pace with demand, averages should remain relatively low and drivers should continue to benefit from comparative savings at the pump.
- The nation’s top five most expensive markets are: California ($2. 80), Hawaii ($2. 64), Washington ($2.49), Nevada ($2.48) and Alaska ($2.46).
- The nation’s top five least expensive markets are: Oklahoma ($1.95), Kansas ($1.98), Missouri ($1.98), Texas ($2.00) and Arkansas ($2.00).
- Averages are down nationwide year-over-year, with the largest yearly savings experienced by drivers on the West Coast: California (-91 cents), Nevada (-73 cents), Alaska (-69 cents), Oregon ( -60 cents), Hawaii (-59 cents) and Arizona (-55 cents).
- Gas prices are up by more than a quarter per gallon month-over-month in Utah (+29 cents), Delaware (+27 cents), Idaho (+26 cents) and West Virginia (+26 cents).
- The most common price at the pump is $2.099 per gallon.
Drivers on the West Coast continue to pay the nation’s highest averages for retail gasoline, and the nation’s top five most expensive markets are all in this region: California ($2. 80), Hawaii ($2. 64), Washington ($2.49), Nevada ($2.48) and Alaska ($2.46). Gasoline stocks grew on the week and remain well above levels commonplace for this time of year, which should keep prices relatively steady as more drivers take to the roads.
ExxonMobil’s Torrance Calif. refinery delayed the restart of its fluid catalytic cracker and associated gasoline production units due to unexpected operational delays. Gasoline production is not expected to be at full capacity until later in the month, and the return of this refinery is expected to help offset some of the growing demand in the state and region.
On the other end of the spectrum, the Gulf Coast remains the nation’s least expensive markets for gas. Every state in the region is represented in the nation’s top ten least expensive markets for retail gasoline: Texas ($2.00), Arkansas ($2.00), Louisiana ($2.01), Mississippi ($2.01), Alabama ($2.04) and New Mexico ($2.04). Pump prices are typically lower in this region of the country, based on its proximity to a large number of refineries.
According to the latest data from the U.S. EIA, high inventories and production characterize the Gulf Coast, and the refinery utilization rate also grew in the region on the week. The supply of gasoline is reported to be ample, and prices within the region should remain on the lower end of the spectrum as we enter the busy summer driving season, provided there are no unexpected disruptions.
As has often been the case in recent years, volatility continues to characterize pump prices in the Midwest. Retail averages are down double digits on the week in Indiana (-13 cents), Ohio (-13 cents), and Michigan (-10 cents). This is in contrast to last week’s report, where each of the abovementioned states were posting double digit increases week-over-week. Gasoline inventories in the Midwest fell for the 12th consecutive week due to growing demand and heavy refinery maintenance, but remain above year-over-year levels.
The region is also home to some of the nation’s lowest pump prices: Oklahoma ($1.95), Kansas ($1.98) and Missouri ($1.98), which are the only three states with averages below $2 per gallon.
The wildfires in the Canadian Oil Sands may potentially impact drivers in the Midwest because crude oil from this region is sold and refined in the Midwest. Disruptions in this oil supply could result in higher costs for refiners, which could lead to higher gas prices. Prices in the region are likely to remain volatile in the near term, and will continue to reflect the ability of supply to keep pace with demand.
Gasoline inventories are up on the East Coast and the return of a few refineries to production in the region are also contributing to the overall expected growth in U.S. refining production. The regional market is well supplied with product, though three of the top ten most expensive markets are located in the region: Pennsylvania ($2.40), Washington, D.C. ($2.39) and New York ($2.38). On the whole, gas prices in the region have been steady, moving by +/-2 cents per gallon over the past week.
Oil Market Dynamics
The possibility of disrupted supply from the Canadian Oil Sands influenced the global price of crude oil over the past week; however, expectations of reduced supply were largely overshadowed by news of increased production out of Iran and other OPEC and non-OPEC nations. Iran reportedly reached pre-sanction production levels, and as production countries continue to fight for market share, the global oil market is likely to remain oversupplied.
Global oil prices rallied over the weekend due to news that the longtime Saudi Arabian oil minister would be replaced. This sentiment was short-lived as reports quickly surfaced that the world’s largest exporter would maintain its current course and attempt to defend its market share by sustaining production levels. Oversupply is likely to continue to characterize the global oil market and attention will remain focused on output from non-OPEC countries and any other factors that may help bring supply and demand into balance.
At the close of Friday’s formal trading session on the NYMEX, WTI was up 34 cents and settled at $44.66 per barrel.
Motorists can find current gas prices along their route with the free AAA Mobile app for iPhone, iPad and Android. The app can also be used to map a route, find discounts, book a hotel and access AAA roadside assistance. Learn more at AAA.com/mobile.9