The magnitude of price movement has been dampened somewhat this year. Last week’s Department of Energy report showed Midwestern supplies had dropped for the third consecutive week and the impact of an issue at the 430,000 barrel per day BP refinery in Whiting, Ind. is still evident. However, despite the decline resulting in a new 2016 low, gasoline stocks for the Midwest Petroleum Administration for Defense District (PADD 2) remain nearly ten percent higher than the same time last year. These robust year-over-year supply comparisons are evident nationwide and pave the way for the lowest pump prices for motorists in more than a decade to persist through Labor Day. Barring an unexpectedly dramatic shift over the next several weeks, national gasoline supplies are likely to end August at their highest level on record.
As of yesterday, approximately 41 percent of gas stations nationwide were selling gasoline for $2.00 per gallon or less, a slight decrease from the 43 percent last week but a sharp contrast to the tenth of a percent below this threshold on this date in 2015. Eight percent of stations nationwide are selling gasoline for more than $2.50 per gallon, down slightly from the nine percent of stations one month ago and substantially from the 56 percent one year ago.
With gasoline supplies high and oil prices still relatively low, pump prices are likely to remain cheap through the rest of the summer and into the fall and could even dip back below $2.00 per gallon once the summer driving season is complete. However, a major market-moving event, like a hurricane or increasing crude oil costs, is not out of the question and could still offset this decline and temporarily drive pump prices higher.
Gas prices in twelve states are now below $2.00 per gallon: South Carolina ($1.82), Alabama ($1.86), Mississippi ($1.90), Tennessee ($1.90), New Jersey ($1.90), Virginia ($1.91), Arkansas ($1.94), Delaware ($1.97), Texas ($1.97), Louisiana ($1.97), Oklahoma ($1.99), and North Carolina ($1.996).
Despite year-over-year savings, West Coast drivers continue to pay the most for gasoline, including the seven highest state averages and the only four states where drivers are paying an average of more than $2.50: Hawaii ($2.70), California ($2.62), Washington ($2.58), and Alaska ($2.57).
The West Coast features the highest prices in the nation as has consistently been the case over the past decade. However, drivers in these same states are also enjoying dramatic yearly savings, with three of the top five largest yearly drops observed in this region: California (-98 cents), Alaska (-89 cents), and Nevada (-80 cents). West Coast prices have also been leading the national slide lower over the past month with California (-24 cents) and Arizona (-20 cents) reflecting the two largest drops in the nation.
Gas prices in the Rocky Mountain region have continued to be among the most stable in the nation, due to their insulated status in the center of the country and few disruptions to regional production this spring and summer. Nevertheless, lower prices are likely on the horizon for drivers in the region with the end to the summer driving season and the transition to winter-blend gasoline rapidly approaching. The changeover to winter-blend gasoline, which has a higher Reid Vapor Pressure (RVP) and is cheaper to produce, can take place in many parts of the country on September 15.
Great Lakes and Central States
Gas prices in the Great Lakes region continue to be the most volatile in the nation, with tightening supplies and refinery issues contributing to seesawing prices for motorists. The past week has featured both ends of the spectrum: Michigan (-10 cents) and Ohio (-6 cents) the largest weekly declines and Kentucky (+8 cents), Indiana (+8 cents), and Minnesota (+6 cents) the top gainers. This recent volatility has been underpinned by reported issues at the BP facility in Whiting, Ind. (the region’s largest refinery) combined with data from the Energy Information Administration showing that regional supplies, while historically robust, are dropping. Despite the recent increases in some parts, Midwestern states still feature prominently in the most dramatic year-over-year declines, with Illinois (-90 cents), Indiana (-86 cents), Ohio (-78 cents), Michigan (-78 cents), and Wisconsin (-73 cents) all among the top ten.
Prices in the Central United States continue to be among the cheapest pump prices in the country, including two of the states where prices are below $2.00 per gallon: Tennessee ($1.90) and Oklahoma ($1.99).
Mid-Atlantic and Northeast
Pump prices in the Mid-Atlantic and Northeast continue to point lower and the region experienced some of the most dramatic declines over the past month, with seven regions in the top ten: West Virginia (-16 cents), Connecticut (-16 cents), Massachusetts (-15 cents), Rhode Island (-15 cents), the District of Columbia (-14 cents), Pennsylvania (-14 cents), and Vermont (-13 cents). These sagging prices have been the result of plentiful gasoline supplies, which remain approximately 14 million barrels higher than this time last year.
South and Southeast
Drivers across the South and Southeast are paying pump prices below $2 per gallon, and the region features six of the ten cheapest states in the nation: South Carolina, Alabama, Mississippi, Arkansas, Texas, and Louisiana. The Gulf Coast is home to the bulk of U.S. refining capacity, and while several issues have contributed some upward pressure to prices over the past week, the approaching changeover to the production of less costly winter-blend gasoline is likely to keep prices pointed lower throughout the region.
Oil Market Dynamics
A key contributing factor to the stalling slide in retail gas prices has been the increase in crude oil prices over the past several weeks. While West Texas Intermediate crude oil is still trading substantially lower than recent years, prices have increased in August and are now trading at the highest level in a month. This increase has been attributed to reports that the Organization of Petroleum Exporting Countries will reconsider production limits by cartel members at its next meeting in an effort to boost oil prices and profits by curbing supply. OPEC’s next meeting is in Algeria in late September, and while agreement on a similar proposal at their last meeting was unsuccessful, member countries Ecuador and Venezuela are expected to again call for measures to cut production. If OPEC members agree to limit production, rising crude oil prices could offset or even reverse expected downward pressure on U.S. pump prices from tapering demand and cheaper seasonal blends. At the close of Friday’s formal trading session on the NYMEX WTI was up $1.00 to settle at $44.49 per barrel.