HOUSTON (ICIS)--US gasoline prices this year may not reach the highs seen in 2013 as increased production rates and a greater influence from bearish crude oil prices will heavily influence the commodity.
In 2013, retail gasoline prices for regular unleaded gasoline in the US hit a high of $3.79/gal on 27 February, slightly earlier than normal.
US gasoline prices usually reach a peak in the second quarter, when many refineries are down during maintenance season and demand picks up ahead of summer.
However, the sharply higher pump prices in January and February 2013 were driven by unexpected regional refinery maintenance and distribution concerns.
Furthermore, no major hurricanes were recorded in 2013 to impact production to the US Gulf coast and east coast operations, which could have led to higher prices for refined products later in the year.
As crude production in the US ramps up from shale resources, and more alternative fuels erode the already waning demand of refined products, 2014 should see lower prices for gasoline and distillates, such as diesel.
“I think prices will edge lower [in 2014].We are in a long-term choppy downtrend due to the boom in US oil production as well as lower demand,” said Phil Flynn, senior market analyst at the PRICE Futures Group.
According to the Energy Information Administration (EIA), the projected US annual average regular gasoline retail price fell from an average of $3.50/gal in 2013 to $3.43/gal in 2014.
Furthermore, diesel fuel prices are projected to average $3.92/gal in 2013 and $3.77/gal in 2014.
In 2013, estimated total liquid fuels consumption increased by 310,000 bbl/day, with transportation fuels accounting for much of that growth, according to the latest EIA report.
But in 2014, total consumption of liquid fuels is expected to decline by 20,000 bbl/day.
For gasoline, the decline in consumption comes from continued improvements in new-vehicle fuel efficiency, which will outpace growth in highway travel.
“Oil production is the major factor but also less demand due to alternatives,” said Flynn.
Barring any major natural disaster, gasoline prices in 2014 are expected to follow the cyclical rise and fall – with peaks during the summer and prices tapering off afterward.
“I vote for US gasoline prices at the pump to reach a peak in April/May unless something unusual happens in the first quarter (such as disruption of crude oil exports from the Middle East, North Africa, West Africa, etc.) to push dated Brent prices to significantly higher levels than we are likely to see based on where things are now,” said Dan Lippe, president of Petral Consulting. “However, I don’t think we should expect [unleaded gasoline] prices to be as strong as in 2013 – mostly because of the bearish pressures on crude oil prices worldwide.”
But that doesn’t mean gasoline prices won’t experience some volatility just as they have in years past.
“In initial forecasts for 2014, GasBuddy believes that prices will again (on a yearly average) be lower than 2013,” said Patrick DeHaan, senior petroleum analyst for GasBuddy.com, a website that offers an online method for visitors to post and view recent retail gasoline prices. “This certainly doesn’t mean 2014 won’t feature a roller coaster ride, and that prices won’t hit record highs, but when all the peaks and levels are averaged, 2014 will feature limited relief versus 2013.”