More assurance about summer gas prices

April 17, 3:40 PMDallas Oil and Gas ExaminerAlisa Martin

Previous Next

Comment Print Email RSS Subscribe

Subscribe

Get alerts when there is a new article from the Dallas Oil and Gas Examiner. Read Examiner.com's terms of use.

Email Address   Include other special offers from Examiner.com Terms of Use

Doug Kemp of Sturbridge, Mass.pumps gas at the Ell-Bern
service station last month in Boston. Gasoline prices are expected
to stay relatively low this summer. (AP Photo/Lisa Poole)

The latest Short-term Energy Outlook produced by our nation's government affirms that retail prices for transportation fuels through September should be significantly lower than those of last summer. Regular gasoline retail prices are expected to average $2.23 per gallon, versus $3.81 per gallon last summer. The price of diesel will peak at approximately $2.30 a gallon, almost half of last summer's average $4.37 per gallon.

In the same breath, however, the U.S. Energy Information Administration reminds us that even the shortest-term picture can change quickly. To illustrate its point, the agency calls attention to "sizable" participation in futures options contracts for the near-term, with a wide variety of strike prices, proving that prices can move across a broad range in a short period of time.

Consumption of gasoline will be slightly higher than last year, as the lower prices offset a weak economy. Consumption of distillate fuels will be about five percent less than last summer, as distillates are more impacted by the economic downturn, in particular, industrial output and foreign trade.

And it follows that the yields refiners make from processing crude oil into distillates will fall to 26.3 percent from 27.8 percent, while gasoline yields will notch up to 45 percent from 42.8 percent last summer. Refinery utilization rates are expected to average 84 percent, the lowest since summer 1985.

It is worth noting that refiners will pay an average $52 per barrel for raw crude, compared to $116 per barrel last summer. Yet the margin between the wholesale price of gasoline and the cost of crude to refiners is projected to remain relatively unchanged,  at 39 cents per gallon.

With the price gap between gasoline and distillate fuels shrinking, any further downside in the economy could cause retail diesel prices to fall below those for gasoline.