By Brian L. Milne, Refined Fuels Editor, Telvent DTN
Wholesale gasoline costs slid across the country’s major metropolitan markets ahead of the final week of October, falling amid a year-on-year supply surplus and tepid demand. The decline has been limited however, displaying uncommon contra-seasonal strength despite the weak state of fundamentals, propped up by a slumping U.S. dollar.
The weaker U.S. dollar has revved up inflation in gasoline prices, holding the U.S. average price for regular grade gasoline at a better than five-month high at $2.834 gallon as of Oct. 18 according to the Energy Information Administration (EIA). Posting a high in the fourth quarter, with the Oct. 18 average just 7.1 cents below the May 10 18-month high is certainly unusual for gasoline, which is typically in a downtrend this time of year.
“Higher prices seem to be hurting demand,” said Peter Beutel, long-time analyst and president of Cameron Hanover, a New Canaan, Conn.-based risk management firm for fuel buyers and sellers.
Preliminary EIA data shows gasoline demand up a modest 0.3 percent from Jan. 1 through Oct. 15 compared with the same timeframe in 2009. The year-on-year growth in consumption is waning however. In fact, the EIA shows gasoline demand for the four-week period through Oct. 15 down 1.4% against the comparable year-ago period. Meanwhile, national gasoline supply is 6% higher than last year.
View DTN’s Weekly and Historical Gasoline Price Index.
While noted in this column ad nauseam, high prices and high unemployment have historically kept a chokehold on gasoline consumption, with the correlation again proving to be true. And while gasoline costs should inch lower, the prospect of a price collapse doesn’t appear to be in the cards considering the Federal Reserve’s intention of increasing the US dollar’s circulation, thereby weakening the greenback’s value.
About the Author
Brian L. Milne is the Refined Fuels Editor for Telvent DTN-a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for more than 14 years as an analyst, journalist and editor. He can be reached at [email protected]