Supply Chain Disruptions Slow Gasoline’s Price Decline

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

For the first time since late March, the Energy Information Administration’s U.S. average for all formulations of regular grade gasoline fell during the week-ended May 16, easing 0.5 cents from a 32-month high to $3.960 gallon. The last time the average fell was during the week-ended March 21 when it was $3.562 gallon. The average has fallen only twice since late January, while advancing for 13 of the 15 weeks since then.

The U.S. retail average is set to again decline when the EIA releases their survey results late Monday (5/23), and should continue to move lower through the Memorial Day holiday weekend into early June.

View Telvent DTN’s Weekly and Historical Gasoline Price Index.

Wholesale gasoline costs fell across the United States during the week through Monday, although the decline varied widely across the country. In several upper Midwest cities, where gasoline prices were boosted by worry over supply constraints due to flooding along the Mississippi River, some of the larger declines in wholesale costs were posted. Cost decreases were smaller in the New York area and in Florida, while steep declines were seen in the Pacific Northwest.

While wholesale gasoline costs are slumping, there remains the threat of supply disruptions due to flooding from the Mississippi, namely through restricted barge movements on the Old Muddy. Greatly reduced barge traffic has more than doubled the transit time in moving product along the Mississippi River while also impeding traffic on the Ohio River. As a result, this has slowed both deliveries of gasoline to the market while reducing the crude supply to refineries concentrated in southern Louisiana. Meanwhile, supply disruptions caused by flooding have prompted Alon Refining Krotz Springs, Inc. to announce on May 20 that they shut their Krotz Springs refinery in La.

“Crude deliveries and refinery operations are expected to resume in June,” a company statement read.

The refinery, which can process 83,000 bpd of crude into gasoline and other refined products, services markets in the southern and eastern US.

Driving Down
In contrast to this price support for gasoline, statistics on demand are lackluster. Data continues to show that high fuel prices are prompting reduced driving.

On Monday, the Federal Highway Administration, an agency within the U.S. Department of Transportation, said Americans drove 3.5 billion or 1.4% fewer miles in March than they did during March 2010. Cumulative travel thus far for 2011 is down 800 million miles or 0.1% at an estimated 688.9 billion Vehicle Miles Traveled from the comparable 2010 period.

Regionally for March, FHA showed yearly VMT declines of 1.5% for the North-East, 0.7% for the South-Atlantic, 1.9% for the North-Central, and 2.6% for the West. VMT for the South-Gulf region was unchanged on the year.

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 15 years as an analyst, journalist and editor. He can be reached at brian.milne@telventdtn.com.

7ads6x98ycss.php