Summer driving season is officially underway and the good news is Americans look set to save on gasoline compared with last summer, but not by much.
The US Energy Information Administration just released their Summer Fuels Outlook and expect “that regularâ€Âgrade gasoline retail prices, which averaged $3.69 per gallon last summer, will average $3.63 per gallon during the current summer (April through September) driving season.”
The retail price of gasoline in the US is mainly driven by the price of crude oil, taxes, distribution costs and margins at the wholesale level. Some of the big banks and oil market analysts recently decreased their 2013 oil price expectations, which is one of the main reasons US pump prices are expected to fall this summer.
“Because taxes and retail distribution costs are generally stable, movements in gasoline and diesel prices are driven primarily by changes in both crude oil prices and wholesale margins. The retail price projections reflect falling prices for the cost of crude oil, best represented by the Brent crude oil price, which averages about $108 per barrel ($2.56 per gallon) this summer compared with the $109â€Âperâ€Âbarrel ($2.60â€Âperâ€Âgallon) average of last summer, said the EIA.”
Adequate gasoline stocks and decreased consumption also factor into the lower retail price expectation. “At the onset of the summer driving season (April 1), total gasoline stocks, at 220 million barrels, are 1 million barrels above the level of a year ago,” said the report, adding “during this summer season (April through September), projected motor gasoline consumption declines by 20,000 bbl/d (0.2 percent) from last summer’s average of 8.9 million bbl/d.”
This is interesting because although total highway travel is expected to increase compared with last year, the greater number of miles traveled will be more than offset by “an increase in fleetâ€Âwide fuel efficiency.” So it appears all those hybrids and better-designed traditional gasoline engines are making a difference.
But don’t start extending that summer vacation just yet. The International Energy Agency just released a report suggesting there are plenty of factors at work that could increase global oil prices, thus pushing up US gasoline costs. Security related supply concerns in Libya and Nigeria along with geopolitical rumblings in Syria, Iran and North Korea could conspire to put upward pressure on global crude prices, “rarely has the market faced such diffuse risks,” said the IEA.