OIL AND GAS
Wild ride before summer cool off at the gas pump
by Daniel J. Graeber
Washington (UPI) Apr 5, 2016


disclaimer: image is for illustration purposes only

U.S. consumers may be in for seasonal volatility in retail gasoline prices as crude oil market dynamics contrast with refinery-side pressures, analysts said.

Motor club AAA reported a national average retail price for a gallon of regular unleaded at $2.05 per gallon, relatively unchanged from one week ago but 24 cents, or 13 percent, higher than one month ago.

In a weekly retail market report, AAA said drivers are paying more at the pump in part because refiners have started putting the summer blend of gasoline on the market. Regional prices may vary dramatically as this fuel blend is slow to deliver.

"This blend costs more to produce, and drivers likely will notice higher prices in areas required to use this fuel, such as in the Northeast, over the next few weeks," the motor club's report stated. "In addition, continued refinery maintenance and rising demand may also lead to higher prices in some areas."

Michigan led the nation in terms of week-on-week variances, with prices climbing 5 percent from last week to $2.05 per gallon. More than a dozen states saw their average price drop from last week, with Minnesota leading the pack with a 3 percent drop to $1.90 per gallon.

Most of the price at the pump is a reflection of crude oil prices, which have declined 4 percent from last week to linger below $40 per gallon. AAA said the crude oil market remains oversupplied and may remain so as doubts persist over the prospects of a production cap agreement among major oil producers. Market dynamics, the motor club said, continue to point to a weak environment for crude oil prices.

Looking forward, a separate report from GasBuddy.com found the disconnect between retail gasoline prices and the crude oil market may linger into late May, which marks the end of the seasonal refinery maintenance season. That may put positive pressure on the supply side, and push retail gas prices higher.

"Odds are high that gasoline prices will reignite, moving higher as more regions begin pumping summer gasoline," GasBuddy said in an emailed report.

Beyond May, however, markets should cool off and GasBuddy said that, barring any unforeseen events, retail gas prices may be at their lowest summer levels in more than decade.

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