uploads///US Regular Gasoline Prices

Will Gasoline Prices Remain Lower for Even Longer?

By

Jan. 26 2016, Updated 9:11 a.m. ET

Gasoline prices

The U.S. Energy Information Administration’s weekly gasoline and diesel fuel price update released on January 25, 2016. It showed that US regular gasoline retail prices averaged $1.85 per gallon. Retail gasoline prices fell by $0.05 per gallon or 3.03% from the previous week’s price of $1.91 per gallon recorded on January 18, 2016. The current gasoline prices are ~9.2% lower than the prices in the same period last year.

Article continues below advertisement

Gasoline prices by region

Gasoline’s average retail price in the West Coast region was $2.63 per gallon on January 25, 2016. The gasoline prices in the Rocky Mountain, Midwest, and East Coast regions were $1.86 per gallon, $1.63 per gallon, and $1.86 per gallon, respectively. The Gulf Coast’s retail gasoline price was lower at $1.62 per gallon compared to the other regions’ prices.

High refinery runs pressured the prices

In the winter months, the gasoline demand usually falls. Most of the vehicles go offline due to colder temperatures. Road trips will decrease. So, the gasoline demand will fall in the winter months. The long-term lower crude oil price environment increased the refinery margins. This caused refineries to operate at more than 90% of their operable capacities. This contributed to the inventory levels.

Article continues below advertisement

The gasoline inventories have risen since the beginning of 2016. For the week ending January 15, another 4.6 million barrels of gasoline were added to the inventory levels. This had a massive impact on the price. However, refineries don’t want to cut down the production levels because of the high gasoline crack spread. So, gasoline prices will see a downtrend until the refineries change from the winter gasoline blend to the expensive summer blend.

Impact

Long-term lower gasoline prices will reduce the refinery margins. Lower gasoline prices are getting support from lower crude oil prices (USO). So, any changes in the crude oil prices will impact refiners’ margins including Alon USA Energy (ALJ), HollyFrontier (HFC), Phillips 66 (PSX), Marathon Petroleum (MPC), Sunoco (SUN), and Western Refining (WNR).

In the next part of this series, we’ll discuss the gasoline price differences in various regions.

Advertisement

More From Market Realist

  • Morgan Stanley sign and stock numbers
    Macroeconomic Analysis
    Morgan Stanley's Buyback Stock Picks in 2021
  • Black Wall Street sign is sign of ethical investing
    Macroeconomic Analysis
    Ethical Investing Stocks and Funds for Your 2021 Portfolio
  • New York City skyline and Goldman Sachs logo
    Macroeconomic Analysis
    Goldman Sachs: Options Trade Picks to Play Earnings Season Volatility
  • Woman working on a laptop
    Macroeconomic Analysis
    Why NOBL ETF Could Offer Upside Potential in 2021
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.