More Upside for Retail Gasoline Prices

By Brian L. Milne, Energy Editor, Schneider Electric

gas_pumpsThe Energy Information Administration’s (EIA) U.S. retail average for all grades of regular gasoline has more upside despite a sharp nearly 15 cents jump in the average during the week-ended July 15 and mixed wholesale costs across the country’s major metropolitan markets for the week-ended Monday (7/22).

EIA reported its national gasoline average surged 14.7 cents to a $3.639 gallon five-week high through July 15, climbing from the July 8 $3.492 gallon better than five-month low.

View Schneider Electric’s Weekly and Historical Gasoline Price Index.

Gasoline futures surged in early July on a combination of rallying crude oil prices in large part due to fear the military coup in Egypt and ensuing protests might impact oil transport through the Suez Canal, surging demand for gasoline and diesel, and sharp drawdowns in U.S. crude stocks. Oil markets were also boosted by comments from Federal Reserve Chairman Ben Bernanke that stimulus efforts by the central bank aimed at driving short-term investment to lift employment would not be yanked prematurely.

Gasoline futures trade on the New York Mercantile Exchange with the Reformulated Blendstock for Oxygenate Blending contract, with RBOB a baseline reformulated gasoline ready for blending with ethanol to become finished gasoline.

Nearest delivered RBOB futures fell to a $2.6870 gallon seven-month low on June 26. The contract has since rallied, trading at a $3.1632 gallon four-month high on the spot continuation chart on July 19, up a sharp 47.62 cents or 17.7% from the June 26 low.

In comparison, the EIA’s U.S. retail gasoline average has increased a modest 6.2 cents or 1.7% since June 24 to July 15. The nearly 40 cents difference between the advance in futures prices and the retail average won’t fully be passed through to retail outlets, but a good deal of that increase will lift the average.

NYMEX RBOB futures erased nearly a dime of value since hitting the high July 17 through Monday with gasoline supply building as U.S. refiners lift processing rates. Still, should refinery outages again push RBOB futures higher, we would see the US retail gasoline average tracking closer to $4 gallon during the current peak driving season.

About the Author
Brian L. Milne is the Energy Editor for Schneider Electric—a leading business-to-business provider of real-time commodity information services among many other activities. Milne has been focused on the energy industry for 17 years as an analyst, journalist and editor. He can be reached at brian.milne@telventdtn.com.

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