The Energy Information Administration said in its Short-term Energy Outlook released last week that it expects retail gasoline to average $2.23 gal and diesel fuel $2.27 gal during the summer driving season, which is defined as the period from April 1 through Sept. 30.
That compares with a $3.81 gal average for gasoline during the summer of 2008, while diesel fuel averaged $4.37 gal.
“The increase in consumption provided by the dramatic fall in petroleum prices from last year is being offset by the weak economy,” said the EIA, which is expected to continue through the summer months. Analysts with the agency believe that trend will continue until the third quarter.
For all of 2009, the EIA increased the expected national average for retail gasoline from its March outlook by 21cts to $2.17 gal, while also lifting its 2010 outlook 21cts to $2.42 gal.
“Regular-grade gasoline prices have increased to more than $2 per gallon, rising slowly but steadily since the beginning of the year in conjunction with rising crude oil prices and refiner margins recovering from recent near-historic lows,” said the EIA.
The Beltway analysts project retail diesel fuel averaging $2.30 gal nationally this year and $2.69 gal in 2010.
During the summer season, motor gasoline consumption is projected to increase 1.0 percent to 9.1 million bpd. During the 2008 peak demand season, gasoline consumption was low due to the high gasoline prices and hurricane-related distribution problems. EIA also said that consumption is not expected to begin showing consistent year-over-year growth until the third quarter.
Distillate fuel consumption from April 1 through Sept. 30, which includes both diesel fuel and heating oil, is projected to be about 170,000 bpd or 4.5 percent lower than last summer's average. So far this year through April 10, implied demand for distillate fuels is 3.961 million bpd or 5.5 percent below the comparable year-ago period.
“Wholesale gasoline margins (the difference between the wholesale price of gasoline and the average cost of crude oil) are expected to be relatively unchanged from the average of 39 cents per gallon last summer,” said the EIA.
The agency predicts this summer’s domestic refinery gasoline supply will increase by about 240,000 bpd from last summer’s average, which was depressed because refiners maximized distillate production due to the much stronger diesel fuel market relative to gasoline. Fuel ethanol blending into gasoline is expected to increase from an average 635,000 bpd during the summer of 2008 to 670,000 bpd this year.
EIA said lower gasoline prices, which depress ethanol production profits, and financial market constraints are expected to curtail ethanol plant construction plans, thwart capacity growth and contribute to temporary facility shutdowns.
Data indicated that total gasoline stocks as of April 1 were 217.0 million bbl, which while ample, is 4.0 million bbl below last year. Versus the five-year average, supply was at an 8.0 million bbl surplus.
“Because of the lower current inventory level than last year, EIA projects the average stock draw will be about 60,000 bpd, compared with last summer’s 173,0000 bpd stock draw and the average of 45,000 bpd over the last 5 years,” said the agency.
Net imports of motor gasoline and blending components for the summer driving season are projected to average 900,000 bpd, down almost 80,000 bpd from last summer’s average because of the expected higher refinery gasoline yields and increase in ethanol blending this year.
Distillate inventories are projected to have started the summer season at a record 142.0 million bbl, about 30.0 million bbl above the five-year average.
“While distillate stocks normally build during the summer season in preparation for winter heating demand by an average of 21 million barrels during the five previous summers, inventories this summer are expected to show little change,” said the EIA.
Refinery production of distillate fuels this summer is projected to average about 300,000 bpd lower than last summer's record average of 4.33 million bpd.
“Refiners maximized production of distillate fuel last year since diesel fuel wholesale prices were about 40 cents per gallon higher than gasoline wholesale prices,” said the EIA.
Wholesale diesel margins are projected to be significantly lower this summer at 31cts gal compared with the 2008 summer at 80cts gal “because of global weakness in distillate markets,” said the EIA.
Biodiesel, which accounts for a small part of the distillate pool, is expected to average 35,000 bpd this summer, up from 20,000 bpd during the summer of 2008. The EIA said the increase in biodiesel blending is driven by refiners and blenders gearing up to meet the 500 million gal mandate for biodiesel included in the Renewable Fuels Standard for 2009, although the biodiesel obligation has been delayed from this year.
“Continuing strong world demand for distillate fuels last year despite record-high prices contributed to U.S. net exports of distillate fuel averaging almost 420,000 bbl/d during last summer,” said the EIA.
During the previous five summers, from 2003 through 2007, the United States was a net importer of distillate fuel, which averaged 120,000 bpd.
“This summer, despite the cutback in domestic refinery production, the United States is expected to continue be a net exporter, averaging about 380,000 bbl/d,” said the EIA.
