Metropolitan regions of the U.S. are increasingly staring at $4 gallon gasoline retail prices or higher, with the national average quickly marching towards the psychological price point, averaging $3.844 gallon on April 18, according to the Energy Information Administration (EIA).
The U.S. gasoline average reported by the EIA first topped $4 gallon on June 2, 2008, and held over the round number for nine consecutive weeks from early June, peaking at $4.247 gallon on July 7, 2008.
View DTN’s Weekly and Historical Gasoline Price Index.
That all-time high is likely to hold through spring, but there are no guarantees that retail prices won’t challenge the July 2008 average sometime this summer. What is increasingly likely, however, is that the U.S. retail average will top $4 gallon by Memorial Day.
Meanwhile, on-highway retail diesel fuel is averaging $4.105 gallon.
The oil market is due for what’s referred to as a technical correction, meaning prices should now move lower because of the steep and quick advance. Determining when such a pullback will occur can be tricky.
Earlier today (4/25), the New York Mercantile Exchange crude oil futures contract with nearest delivery traded at a $113.48 barrel 31-month high before reversing lower, but still holding above $111.00 bbl. NYMEX RBOB (Reformulated Blendstock for Oxygenate Blending), which serves as the gasoline price benchmark, traded at $3.3416 gallon today, a new 33-month high for the contract nearest delivery. There were only three days in which the RBOB contract traded higher, occurring on July 11, 14 and 15 in 2008. The contract reached the all-time high on July 11, 2008 at $3.6310 gallon.
Based on current trading in the futures markets, there’s more upside to go for retail pump prices. Typically it takes as many as eight weeks for the full change in price at the wholesale level to be reflected in retail prices, with most of the cost change at the wholesale level reflected by retail prices within two weeks.
Despite high prices, fuel demand in the U.S. is not crumbling to the degree some analysts had projected. The American Petroleum Institute said on April 21 that in March, gasoline deliveries, a proxy for demand, increased 6.1% compared with March 2010. For distillates, which include heating oil and diesel fuel, deliveries surged 11.3% in March from March 2010.
“Strong deliveries continue to indicate growth in the economy,” said API Chief Economist John Felmy. “The increase is consistent with expansion in the manufacturing sector reported by the government, although that was relatively modest. The increase is especially significant given the potentially depressing effect of rising prices on fuel demand and amid some prognostications that forward growth in the economy may be more modest than hoped.”
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 15 years as an analyst, journalist and editor. He can be reached at [email protected].