US retail gasoline nearing peak prices for the season

Focus article by Annalise Little

HOUSTON (ICIS)–US retail gasoline prices, which averaged nearly a dollar lower than last year at $2.76/gal on Friday, may be close to reaching their summer peak.

The US has seen gasoline demand climb to levels not seen since 2007, according to storage data published by the Energy Information Administration (EIA). For the week ending 22 May, the EIA reported that US consumption of motor gasoline was 9.734m bbl/day.

Pair that with a recovering crude oil market, some analysts have said, and the US may see gasoline prices peak earlier than usual this year.

“After a steady increase in recent months, it is possible that national pump prices may be near a seasonal peak,” AAA spokesman Michael Green said.

Last year, the peak for regular unleaded gasoline during summer months wasn’t hit until 20 June, when ICIS assessed unleaded gasoline at $2.93/gal.

Founder of Petral Consulting Company Daniel Lippe thinks the year’s peak – which he described not only as retail prices, but a combination of prices and demand – has already been hit.

“There’s a pretty good chance that May could be the high point for the year,” he said this week, predicting that crude oil prices will take a “breather” in June as simmering geopolitical forces play out.

Gasoline prices have spent much of the year increasing sharply – sometimes as much as 10 cents per week – after last year’s crude oil market crash brought refined products prices down with it. While the market struggled to maintain balance in the plunge, motorists benefited at the gas pumps, seeing national averages as low as $2.15/gal in early 2015 before beginning to climb.

Factors bringing prices up now include crude oil prices, higher summer demand, refinery outages and refiners having to spend more on federally mandated summer-blend gasoline.

Friday’s national average of $2.76/gal was two cents higher than a week ago and nearly a dollar lower than $3.66/gal a year ago.

Not all analysts agree that the retail gasoline market has hit its peak for the year.

 “There’s still some upside risk – the price of oil is continuing to move higher, the summer driving season is kicking into high gear,” said analyst Phil Flynn. “I think we’re seeing stronger-than-expected gasoline demand and I think this year [peak prices] could happen later in June.”

Going forward, hurricane season could affect refinery production, though this year’s season is expected to be below-average. Prices will also continue to be driven by crude oil prices, whether up or down.

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