Fuel Decline Slow

By Brian L. Milne, Refined Fuels Editor for DTN

Most gasoline prices at retail outlets across the country will continue to move lower as we begin October this week, which is consistent with the traditional price decline at the pump for the time of year as demand retreats after the summer driving season.

Earlier in September, most parts of the country also transitioned to winter grade gasoline formulas, which are less costly to produce and thereby offering lower costs at the pump for consumers.

Like so much else in 2008 however, there are factors that make this year’s seasonal change in gasoline prices less certain for all regions of the country, namely in the Southeast west to Texas. The reason is the supply disruptions caused by hurricanes Gustav and Ike that at one point shut-in more than 21% of the refining capacity in the U.S.

The lost gasoline production due to the storms came as refiners were making the switch to winter grade gasoline and, to make this transition had drawn down summer gasoline inventory levels. The transition exacerbated the lost gasoline production and the country’s gasoline supply level tumbled to the lowest level since August 1967.

Demand is also down, which has helped to ease the low inventory situation. In fact, in mid-September demand was down more than 7.5% against the comparable 2007 period at one point, while government data shows the consumption rate 2.2% lower so far in 2008 against last year.

Nationally, the Energy Information Administration (EIA) last reported the average price for regular grade gasoline down 11.7 cents to $3.718 gallon, which is still more than 90 cents higher than during the same period in 2007. The U.S. average will continue their decline as wholesale prices were mostly lower on the week.

But, motorists in parts of Texas and the Southeast might not realize a savings when filling up at their local station until the oil industry completes the restart of remaining refineries still shut in the aftermath of the September hurricanes.

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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