U.S. gasoline prices are falling again

By Laura Sanicola

(Reuters) – U.S. gasoline prices rose at the start of the month but are falling again after West Coast refinery outages ended and seasonal demand fell.

Prices fell after a week-long rebound after the Organization of the Petroleum Exporting Countries and its allies announced plans to cut the OPEC+ production target by 2 million barrels per day.

President Joe Biden plans to sell the last part of a release of 180 million barrels of crude oil from America’s Strategic Petroleum Reserves by the end of December. Biden Democrats hope the move will help the party hold slim majorities in both houses of Congress in November’s midterm elections.

Not all prices go down. US diesel prices have risen over the past two weeks due to strong global demand, low inventory levels and weak production in Europe due to refinery strikes in France.

WHERE ARE FUEL PRICES NOW?

The national average is $3.85 a gallon, up 18 cents from its mid-September low of $3.67 a gallon, but down from highs reached two weeks ago.

The price of diesel has risen 33 cents over the past month, according to data from the US Energy Information Administration, now at $5.32 a gallon.

The United States uses about 9 million barrels of gasoline a day and about 3 million barrels of diesel, according to federal data.

U.S. oil refineries struggle to replenish low inventories, even when cold weather sets in, which usually matches lower fuel demand. The four-week rolling average for gasoline demand is 2.4% lower than the same period last year, while refinery utilization is 5% higher.

U.S. gasoline prices rose earlier this year, peaking in June, following Western sanctions on Russian energy products and lower global refining capacity after pandemic-related shutdowns.

WHAT AFFECTED PRICES?

Last month, U.S. gasoline prices rose largely due to regional refinery outages on the West Coast and Midwest. In California, costs are up more than $1 a gallon in the past month, while in Texas prices remain lower than a month ago.

Refinery maintenance often takes place in the fall when demand drops after the summer driving season. This fall, however, some refineries had to close units without notice due to infrastructure problems.

Three refineries in Washington state and California had scheduled maintenance while another experienced an unplanned outage in September, according to data from Refinitiv and refinery sources. In the Midwest, BP-Cenovus’ Toledo refinery is still offline after a deadly explosion shut down the plant late last month.

In October, several French refineries closed as workers went on strike to fight the rising cost of living, leading to a drop in global distillate stocks and an increase in US distillate exports.

U.S. oil refiners were using 89.5% of their capacity last week, still at a seasonally high level. Overall U.S. refining capacity has shrunk since the coronavirus pandemic crushed demand in early 2020.

Gasoline produced to meet California’s environmental rules has dropped nearly $2 gallons in wholesale markets in Los Angeles and San Francisco over the past month due to increased supply, reports said traders.

WHAT OTHER FACTORS AFFECT FUEL PRICES?

Tight refining supply has kept the spread between wholesale gasoline futures and retail prices currently at around $1.25 a gallon, well above the 88-cent average over the past five last years.

U.S. retail gasoline demand has been sluggish throughout the summer, but has improved over the past month, according to federal data. This helped to limit inventories, with US gasoline inventories near their lowest level in eight years. Further disruptions to refining could further reduce this inventory, which would increase prices.

(Reporting by Laura Sanicola and Stephanie Kelly; Editing by David Gaffen and David Gregorio)

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