Gasoline Prices Edging Higher into December

By Brian L. Milne, Refined Fuels Editor, Telvent DTN

 

Retail gasoline prices are moving higher across most of the country as Americans finalize travel plans for the Thanksgiving holiday. AAA expects a 2.1% increase in automobile travel of 50 miles or more from home with this year’s holiday compared with 2008, projecting 33.2 million roadway travelers.

 

The automobile club expects a total of 38.4 million Americans will travel 50 miles or more from home over the Thanksgiving holiday weekend, a 1.4% over last year when holiday travel plunged 25.2%. AAA said the projected increase reflects improved consumer confidence from one year ago, better financial market performance and a growing sense among many consumers that the worst of the global economic crisis is behind us.

 

Although wholesale gasoline costs are starting the last full week of November mixed, the wholesale gasoline market advanced during the previous week and is moving up ahead of Thanksgiving, goosed higher by a weekly boost in preliminary gasoline demand figures and a larger-than-expected decline in national inventory levels. There was also a psychological lift in gasoline prices after Valero Energy, North America’s largest oil refiner, said Nov. 20 that it would permanently close its refinery in Delaware City, Delaware, with the shut down taking effect immediately.

 

Valero said it was losing about $1 million a day because of rising crude costs while gasoline demand was weak. The refiner also said it could not find a buyer, and had exhausted all other options before deciding to shut the facility down.

 

Valero’s announcement follows a similar action taken last month by Sunoco Inc., which indefinitely shut its oil refinery in Westville, New Jersey because of poor economics. In addition to lost demand due to recession, a combination of federally mandated demand for renewable fuels in the transportation sector, increasing fuel efficiency requirements and a trend for rising imports of gasoline offers a bleak outlook for some refiners. This is especially true for refiners along the East Coast that will see increased competition from imports.

 

Downward Trend

The U.S. average for regular grade gasoline has declined 2.4% since posting a $2.694 gallon 2009 high in early November, slipping to a one-month low at $2.629 gallon. Expect the average to move higher off the low, with the U.S. government saying earlier this month that it projects a $2.66 gallon average for the fourth quarter, and sees retail gasoline prices trending up into next year. Analysts with the government peg a $2.81 gallon average for 2010.

 

 

About the Author

Brian L. Milne is the Refined Fuels Editor for Telvent DTN-a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for nearly 14 years as an analyst, journalist and editor. He can be reached at brian.milne@dtn.com.

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