Fuel Spikes Driven by Market

By Brian L. Milne, Refined Fuels Editor for DTN

The late July to August slide in retail gasoline prices along the East Coast will likely stall this week, as wholesale prices bumped higher at terminals at major cities and metropolitan areas in states bordering the Atlantic Ocean.

In contrast, West Coast consumers should expect pump prices to continue their decline ahead of the upcoming Labor Day holiday weekend, as wholesale prices for the region declined.

Since posting a record high at $4.114 gal in early July, the average retail price for regular grade gasoline across the United States has tumbled 37.4 cents or 9.1%. While falling for six consecutive weeks, the American driver is spending, on average, 95 cents or 34% more for each gallon of gasoline purchased compared with the same time in 2007.

View DTN’s Weekly and Historical Gas Prices

There are competing factors affecting gasoline prices as the summer draws to a close, including lower demand this season as U.S. drivers reacted to high fuel prices by cutting back on the amount of gallons they purchase.

The lower demand in the U.S. for gasoline, down 1.6% so far this year compared with 2007, initially allowed for gasoline supply to build. In reaction, U.S. refiners, which process crude into gasoline, diesel fuel and other byproducts throttled back their production rate that has erased and early to mid summer surplus.

Refiners will keep a close eye on their production rate in the coming weeks as gasoline demand is set to contract further as the summer driving season nears an end and as they look to clear out summer grade supply and move to winter grade gasoline formulas.

Summer gasoline has stricter environmental regulations then the winter grade formula that are designed to reduce the release of harmful emissions into the atmosphere which are more problematic during hot weather conditions. Summer gasoline costs more to produce, so refiners are reluctant to head into autumn with high inventory levels of this gasoline blend.

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 brian.milne@dtn.com.

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