Fuel Bucks Downward Trend

By Brian L. Milne, Refined Fuels Editor for DTN

In the U.S., driving slows down in the winter after the holidays, with demand for gasoline usually the lowest in January and February. So too, are prices, with the wholesale gasoline market typically posting their annual low during one of those two months; doing so for the past three years–in January in 2007 and 2008, and in February in 2006.

However, there is nothing typical about markets lately whether you’re talking about the stock market, real estate, energy, and so on; with the wholesale gasoline market climbing sharply during the holidays to boost retail gasoline prices nationally.

On Christmas Eve day, the financially traded futures market for gasoline that is used as the benchmark for trading large volumes of gasoline across the country tumbled to a multiyear low.

In fact, regular grade gasoline in South Carolina had fallen below $1 gallon at one locale, albeit the extra savings for drivers, which paid as much as $5 gallon or more after Hurricane Ike triggered shortages in the Southeast and elsewhere, was sparked by promotions at local stations to draw in customers. Since then, gasoline has been moving higher.

All Grades Up
According to the Energy Information Administration (EIA), the average U.S. retail price for regular grade gasoline as of Dec. 29, 2008 was $1.613 gal. Since Dec. 29, the wholesale gasoline market has moved higher across the country, with the greatest increases occurring in the Midwest where metropolitan areas encountered higher costs on average of 20 cents per gallon or more. The wholesale average in Indianapolis, Indiana, surged 26.4 cents per gallon since Dec. 29.

It is not clear whether the upturn will continue through January. However, after 15 consecutive weeks in moving lower, the average price for regular grade gasoline in the U.S. is set to climb.

About the Author
Brian L. Milne is the Refined Fuels Editor for 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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