The imbalance between supply and demand and the resolution of distribution and refinery issues, is contributing to falling prices at the pump. The national average had been under some upward pressure due to regional price spikes, the most notable in California because of lingering refinery issues. These supply challenges appear to be all but resolved, and according to the California Energy Commission gasoline supply in the state grew for the fourth consecutive week, and erased what had been a year-over-year deficit. Supply in the Midwest is also reportedly at comfortable levels and although prices in the region can be volatile, any upward swings may be offset by falling prices in other regional markets. Barring any major supply or distribution issues, and if the price of crude remains depressed, the national average remains poised to continue lower approaching the spring maintenance season.
Consumers in 43 states are paying averages below $2 per gallon. The nation’s least expensive markets for retail gasoline are Oklahoma ($1.49) and Missouri ($1.50), and drivers in a total of 25 states are paying averages below the $1.75 per gallon threshold. Hawaii ($2.63) regained its spot at the nation’s most expensive market for gasoline, and drivers in the state are paying a nickel per gallon more than second-place California ($2.58). As mentioned, pump prices in the Golden State appear to be easing, largely due to the state’s gasoline supply reaching its highest mark since 2014 following the resolution of refinery issues. Alaska ($2.42), Nevada ($2.27) and Washington ($2.16) round out the nation’s top five most expensive markets for gasoline.
Pump prices in the vast majority of states (46) are discounted on the week, and drivers in 15 states are saving a nickel or more per gallon at the pump over this same period. The largest weekly savings are for drivers in California (-9 cents), Washington (-8 cents), Oregon (-8 cents) and North Dakota (-7 cents). On the other end of the spectrum, motorists in five states are paying more to refuel their vehicles versus one week ago. Prices are up more than a nickel per gallon in the Midwestern states of Ohio (+8 cents), Indiana (+6 cents) and Michigan (+6 cents). This comes on the heels of last week’s report, where prices in the region were down double digits week-over-week.
Drivers nationwide are benefitting from monthly savings of a nickel or more in the price to refuel their vehicles. With the exception of Hawaii (-5 cents) and Alaska (-6 cents), motorists in every state are experiencing double-digit savings in the price at the pump. Averages in 10 states are down by a quarter or more per gallon month-over-month, led by Illinois (-33 cents), Oregon (-33 cents) and Washington (-31 cents).
Retail averages typically fall during the winter months, due to reduced driving demand, and pump prices slid sharply in the final months of 2015. This is causing the magnitude of the yearly savings to narrow and has also led to a handful of states reflecting yearly premiums. Pump prices are discounted on the year in 45 states and Washington, D.C., and motorists in 28 states and Washington, D.C. are saving more than quarter per gallon year-over-year. Indiana (-57 cents) is the only state where pump prices are down by more than 50 cents per gallon versus this same date last year. Gas prices are higher on the year in California (+14 cents), Idaho (+13 cents), Nevada (+5 cents), Utah (+3 cents) and Washington (+2 cents).
Market fundamentals continue to point to supply outpacing demand; however, crude oil prices have been subject to some speculation about when and if prices have reached their bottom. Both Brent and West Texas Intermediate rallied to close out last week, movement that was largely attributed to reports that Russia and Organization of the Petroleum Exporting Countries member Saudi Arabia may meet discuss potential production cuts. The feasibility of both countries agreeing to these cuts remains in question, and the global oil market will also have to contend with Iranian oil returning to the global market following the removal of sanctions.
U.S. production also remains a key variable in the global equation, and despite the lower price environment domestic crude oil inventories continue to test record levels. The impact of the removal of the decades old crude oil export ban is also a question in regard to production and global oil supply and has been cited as the central reason the gap between WTI and Brent prices has closed.
At the close of Friday’s formal trading session on the NYMEX, WTI was up 40 cents and settled at $33.62 per barrel.