The Colonial Pipeline has been shut down since Friday, May 7th after a cybersecurity attack. It is the largest fuel pipeline in the United States that runs from Texas to New Jersey and transports roughly forty-five percent of the East Coast’s fuel supply. Colonial transports 2.5 million barrels per day of gasoline, diesel, jet fuel and other refined products through 5,500 miles of pipeline. The pipeline connects refineries from the Gulf Coast to more than fifty million people in the South and East.
Last December I wrote about the proposed Transportation and Climate Initiative (TCI), which would require wholesalers of gasoline and diesel in participating states to buy carbon credits to sell their fuel. As a result of the COVID-19 pandemic, the TCI jurisdictions have adjusted their timeline for developing the program, and a final Memorandum of Understanding is now expected in the fall of 2020. TCI notes that work on the program details will continue, as will engagement with stakeholders.
Despite Hurricane Dorian’s effects on the Atlantic coast, both locally and across the nation gas prices are expected to continue to fall as we switch to cheaper winter gasoline.
TRADE WARS! TANKER GATE! IRANIAN SANCTIONS! MIDDLE EAST UNSTABLE! MIDDLE EAST PEACE! VENEZUELA SANCTIONS! INVENTORIES UP! INVENTORIES DOWN! REFINERY OUTAGES! PRODUCTION DOWN! PRODUCTION UP! CRUDE CHASES $50!
CRUDE RUNS UP TO $60!
WHAT DOES IT ALL MEAN?
The thinly traded holiday gasoline market bottomed out on December 24th with a NYMEX low of $1.2352 per gallon. Here we are a few days into the New Year trading at a high of $1.4146. Here’s what happened to push prices higher.
Good news for those traveling next week. Oil prices have fallen considerably which is impacting gas prices. Currently, the national average gas price is $2.68 a gallon. While this is higher than the price drivers paid last Thanksgiving, the national average was $2.52 a gallon, it’s still lower than this year’s high of $2.97 a gallon last Memorial Day.
Last weekend we all welcomed the month of September, Labor Day celebrations and the unfortunate realization that summer has ended. Though technically the summer doesn’t end until the equinox on September 22nd, the Labor Day weekend traditionally marks the end of summer for schools, as well as the close of the summer driving season.
As summer winds down and eases back into school, football, and cooler temps, less expensive higher Reid Vapor Pressure (RVP) grades of gasoline enter the distribution system.
On May 22nd we were hoping for a market correction prior to the holiday weekend. On that day the front month NYMEX RBOB contract settled at $2.2636. Climbing from May 2nd, close @ $2.0803. A whooping $0.18 price move inflicting severe pain on your local gas station distributor leaving retail gasoline margins negative in some markets and begging the question, who wants to blink first and raise prices?
Gas prices are rising to record levels as the summer travel season is upon us. With higher gas prices, “the EIA says the average U.S. household will spend an additional $190 to keep their cars’ gas tanks filled this summer.” As evidenced in 2008, when gas prices rise, consumers start to change their buying behavior. Currently, American consumers are not seeing the $4 per gallon levels of 2008 but will make small changes in their lifestyles to compensate for the increased prices. Some consumers will cancel their summer vacations, but economists expect to see smaller, less drastic changes in discretionary spending. For instance, when a consumer pays more at the gas pump, they would be less likely to purchase items in convenience stores.