By Brian L. Milne, Refined Fuels Editor
While there are a host of metropolitan regions across the country where gasoline outlets are posting a per gallon cost for regular grade gasoline above $2, the round number that at one-time had a psychological impact is again proving to be a tough obstacle, as the U.S. average holds below the figure.
In late March, the Energy Information Administration (EIA) reported the national average for regular grade gasoline at $1.962 gallon. The average will likely end March slightly higher, but below $2 gallon after pricing in gasoline’s wholesale markets moved mixed during the final full week of the month.
Prior to the price run-up that hit full throttle in 2005 before crashing midway through 2008, retail gasoline prices averaged below $2 gallon nationally. The U.S. average peaked at $4.114 gallon on July 7, 2008, and has held below $2 since Nov. 24.
Round numbers like $2 gallon for gasoline or $50 a barrel for crude oil are easily identifiable, and are frequently cited to describe an ongoing change in pricing when prices crest over, or below, those price marks. As such, they offer a psychological impact.
The U.S. average for regular grade gasoline still remains in a position to climb above $2 gallon this spring, but it is less likely that will happen before Tax Day in mid-April. The timing is less certain as underlying fundamentals—the supply and demand disposition—remains bearish. In short, stockpiles of oil are building while the consumption rate is far from robust.
Gasoline demand remains above 2008 levels, but has surrendered much of the growth detailed in February.
Past linkage between gasoline demand and the unemployment rate shows the higher the number of people that are out of work, the rate of gasoline consumption falls. February ended with an 8.1% unemployment rate, up 3.3% from year prior, and that figure is expected to climb when March data is released.
Meanwhile, gasoline demand that was, when viewing a four-week average, 2.2% higher at the end of February compared with the same timeframe in 2008, has eased to 0.7% in late March.
It appears these indicators remain valid that, in the short-term illustrate restraint in gasoline prices. Crude oil, which had surged above the $50 a barrel in late March are surrendering those gains, while wholesale gasoline markets are down sharply just ahead of month’s end.
It could very well be that we see the national average touch $1.90 gallon before $2.
About the author
Brian L. Milne is the Refined Fuels Editor for DTN—a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for nearly 14 years as an analyst, journalist and editor. He can be reached at [email protected].