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Gasoline prices are set to reach their highest level since 2018 as demand starts to pick up nationwide, but this is not the only reason that prices at the pump are soaring
(Bloomberg) -- Americans are getting ready to rekindle their love affair with the open road, unleashing a full-fledged recovery for gasoline that could send demand to a record.Traffic is already roaring back in cities like Houston as offices reopen. Things will really start taking off this summer as pent-up travel demand finally busts out thanks to the increase in vaccinations. After almost half of Americans ended up canceling trips in 2020, many are planning to take an extra week of vacation this year to make up for lost time. Theme parks are gearing up for an influx of visitors, and attendance at national parks is expected to swell.Demand is predicted to be so hot that Phillips 66 is set to reverse the flow of one of its pipelines starting May 1 so it can carry gasoline from Texas into Denver as more tourists head west.Charles Ocasek, a 24-year-old, is one of them. In late May, he’s hitting the road for the first time since the pandemic started, driving his 2004 Nissan Pathfinder from the Chicago suburbs out to the Rocky Mountain resort town of Telluride, Colorado, for a meet-up with friends. He’s been living with his parents who are in their 60s, so the specter of getting and spreading Covid kept him from traveling until now. But by next month, he’ll be fully vaccinated, and he’s planning more trips for the summer.“I’m tentatively planning on taking a month or a month-and-a-half and doing a multi-state road trip all over the country,” Ocasek said.The surge in consumption means gasoline is likely going to be even more expensive than the U.S. government is forecasting. The Energy Information Administration this week said average pump prices this summer will be more than 30% higher than last year at $2.78 a gallon. But many analysts are estimating prices will hit $3 a gallon for the first time since 2014.Rising gasoline prices will be another marker of inflation that impacts Americans unevenly. Just like soaring food bills, more expensive fuel hits harder for lower-income families, with the costs making up a larger share of spending. That comes amid the unequal economic recovery, with the Black unemployment rate still trending high and lower labor-market participation among Americans without college educations.Meanwhile, crude traders are widely anticipating a meaningful return of fuel demand in the world’s largest oil consuming country to help drive the next leg higher in prices.A big part of oil’s rally so far this year has been on the supply side, with the OPEC+ alliance displaying strict output management and higher prices not yet drawing U.S. shale producers out in force. But crude has pulled back from multi-year highs in recent weeks, and will continue to face resistance until concerns over consumption start to fade.“Prices are higher today than where they were pre-pandemic, despite demand not all the way back,” said Peter McNally, global head for industrials, materials and energy at Third Bridge. “Vaccines are now being mass-distributed to the biggest consumers of energy, as we’re getting to business travelers and family vacationers, which we haven’t seen to date.”One of the most bullish predictions for fuel use comes from Mark Le Dain, vice president for strategy at refinery consultant and software company Validere, founded at Harvard. He says this summer will be the strongest one ever for gasoline demand, beating the previous all-time high set in 2019. He cited an increase in bookings for national and state parks and a shortage of rental-car availability along with the return to work from people who haven’t gone back yet.For a record 2021 to happen, Americans will have to add about 1 million barrels of gasoline consumption a day to levels as of March 26. The extra portion alone would be enough to fill 1.5 million empty F-150 Ford pickups.Even so, “there are a lot of things aligning right now to show demand being strong,” Le Dain said.National retail prices for gasoline averaged $2.87 on Wednesday. As demand strengthens this summer, the price will hit at least $3, according to Patrick DeHaan, head of petroleum analysis at retail tracker GasBuddy, Robert Yawger, head of the futures division at Mizuho Securities and Trisha Curtis, chief executive officer at analysis firm PetroNerds in Denver.“I’m not sure when it happens, but yes, it happens,” Curtis said.A surge in gasoline burning will also bring a jump for greenhouse gas emissions after declines in traffic congestion helped to clear the air last year.After Historic Fall, Carbon Emissions Are Now Coming Back FastIt’s not just road trips that will boost demand for fuels.U.S. airlines are bringing back more pilots as they prepare for a travel rebound, and jet fuel consumption is on the rise. Still, that segment of the oil market has much further to climb before hitting pre-pandemic levels.Outside of travel, another linchpin for the oil recovery will be how many people burn fuel to go back to work, and for how many days a week.“There is a slow return back to offices for workers, but it takes time,” said Jeff Lenard, vice president for strategic industry initiatives at the National Association of Convenience Stores.One thing that could scuttle the recovery would be a spike in Covid-19 cases. The U.S. Centers for Disease Control and Prevention this month said that fully vaccinated people can resume recreational travel in the U.S. at “low risk,” but CDC Director Rochelle Walensky has also warned of “impending doom” as cases begin to rise again.Californians May Soon Pay $4 for Gasoline With State ReopeningJennifer Fink, 54, and her husband, John, are looking forward to getting out of their home in the San Francisco Bay area for the first time since the pandemic started. They’re planning a mid-summer road trip up through Oregon and Washington state to Tofino, British Columbia. But they’re also keeping an eye on travel restrictions and canceled plans for trips last year when California was forced back into lockdown. Fink is more optimistic this time after getting her first dose of the vaccine. Her husband is already fully vaccinated.“Maybe the fifth or sixth time is the charm, and we’ll be able to go somewhere,” she said.Americans on average are planning to take 13 vacation days this year, up from just eight days in 2020, according to a study from travel giant Expedia Group Inc. A study from AARP showed that just over half of Baby Boomers plan to travel in 2021, and nearly a quarter of those making plans didn’t travel at all last year.“What we’re hearing more and more is that people are just desperate to go out and do the stuff that they were not able to do,” Seema Shah, chief strategist at Principal Global Investors, said last month in an interview on Bloomberg Television. “There could be certainly some upside surprises to come.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Californian drivers are edging closer to paying $4 for a gallon of gasoline with the state open for business again and Governor Gavin Newsom planning for a summer with almost no restrictions.The move toward normalcy in the most populous U.S. state has already sent prices at the pump near their highest since the fall of 2019, as everything from theme parks to indoor swimming pools get ready to come back.The reopening is a much-anticipated boon to a hard-hit state that relies heavily on tourism, and to a fuel market that saw demand plunge during the pandemic. But the gasoline price spike also shows the inflation risks for the economy.In San Francisco’s cash market, where refiners and retailers trade the motor fuel, the premium on gasoline for April delivery rose by 2 cents to 12 cents a gallon above New York futures on Thursday, according to data compiled by Bloomberg. That’s the highest since Jan. 7. The cash-market price is rising in Los Angeles, too.Cash market increases typically are passed to consumers after the fuel is moved down the supply chain.At the pump, the average price in the state has risen 18 cents in the last month to $3.93 a gallon on Thursday, according to the AAA auto club. The average last topped $4 on Nov. 14, 2019, AAA spokesman Jeff Spring said.Demand already had been increasing with Californians traveling more before Newsom’s announcement, said John Faulstich, oil analyst at Stillwater Associates in Irvine, California.Fuel prices across the country have risen with crude’s rally this year, but supplies are tighter in California.Last week, the West Coast and New England were the only U.S. regions to see gasoline inventory fall, according to data from the Energy Information Administration. West Coast stockpiles, reflected mostly by California, fell by 547,000 barrels to 30.9 million barrels.The price hikes may limit driver appetite for gasoline, said Robert Yawger, head of the futures division at Mizuho Securities. At psychological levels like $4, gasoline will be blamed for inflation, “and you just accelerate clean energy development,” he said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- As Europeans drive less, the price they’re paying for gasoline to power their cars is moving higher as the continent’s oil refineries boost exports -- but make less -- of the fuel.The so-called crack spread, the price at which gasoline trades over crude oil, hit its strongest for the time of year since 2017 at the start of April. That’s helped push retail prices to their highest in years on a seasonal basis in several of the continent’s big consumer nations including Germany, France and Italy.At least a quarter of the gasoline-making units at northwest Europe’s oil refineries have been offline recently for maintenance, or suffered unplanned disruption. That’s further reduced output at a time when plants are processing less crude oil anyway because of the pandemic. Add in healthy exports, in particular to the U.S., and prices suggest the market has more than offset the lost demand.“There’s a huge pull on European gasoline to other key regions,” said Mark Williams, an oil analyst at Wood Mackenzie Ltd., adding that resurgent demand in the U.S. is boosting the European market.When Europe’s spring lockdowns came into force last year, millions of barrels of gasoline demand disappeared and processing margins sank deep into negative territory. This time that hasn’t happened, despite the continent’s latest wave of mobility-restricting lockdowns limiting road use and perpetuating weakness in two other key transport fuels: diesel and jet fuel.European exports of gasoline to the U.S. surged by more than 60% month-on-month in March and are set to stay strong in April, according to data from Kpler, an analytics firm. Shipments to West Africa are also healthy, averaging almost half a million barrels a day in the first quarter of this year. Nigeria has also recently said it won’t phase out gasoline subsidies.Gasoline MachinesAt the same time, Europe’s own supply is being squeezed with multiple gasoline-making units called fluid catalytic crackers taken offline.Germany’s Miro refinery, which normally supplies between a quarter and a third of the nation’s gasoline, has undergone a major overhaul this spring. The U.K.’s Pembroke plant is also among refineries that reduced supply in recent weeks.“These outages are likely not economically motivated, but more a result of scheduling,” said Koen Wessels, an analyst at Energy Aspects, noting the loss of output has been supporting margins.The refinery disruption and high exports have helped to strengthen Europe’s gasoline market even as the continent’s road use slumped to its lowest so far this year in the week through March 28, according to transport data compiled by Bloomberg. It was down about 30% on average, compared with pre-pandemic levels.While those forces are helping gasoline, they’re not enough to push margins for other key transport fuels back to seasonal norms. With Europe’s air traffic still more than 60% below the pre-pandemic level, refiners are still shifting jet fuel production into diesel, adding to supplies and pulling down prices.“We could well see another few weeks of strength before refiners bring on enough capacity to alleviate the shortage meaningfully,” said Eugene Lindell, an analyst at JBC Energy, when asked about current gasoline strength. “We would expect the ample spare capacity to take care of the issue once runs are ramped up.”(Updates with comment from JBC Energy in final paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
NEW YORK (Reuters) -Oil prices were little changed on Thursday as a falling dollar and rising stock markets offset earlier declines caused by a big increase in U.S. gasoline stockpiles and subdued demand compared with pre-pandemic levels. "Crude prices are struggling for direction as short-term COVID pressures are countered by a much weaker U.S. dollar," said Edward Moya, senior market analyst at OANDA in New York. The U.S. dollar fell to a two-week low against a basket of currencies, tracking Treasury yields lower, after data showed a surprise rise in U.S. weekly jobless claims.
NEW YORK (Reuters) -Global benchmark Brent crude inched higher on Wednesday on improving global economic outlook, but U.S. crude fell on rising gasoline inventories amid fears that new coronavirus outbreaks will weaken a global recovery in fuel demand. Brent crude futures were up 44 cents, or 0.7%, to $63.18 a barrel by 1:42 p.m. EDT (1742 GMT) while U.S. West Texas Intermediate crude fell 40 cents, or 0.7%, to $59.73. U.S. crude stocks fell 3.5 million barrels last week, but gasoline inventories jumped 4 million barrels, the Energy Information Administration said, compared with expectations in a Reuters poll for a 221,000-barrel gasoline drop.
The U.S. Energy Information Administration forecast a more than 30% year-over-year rise in summer gasoline prices on the back of expectations for higher crude oil prices and an increase in travel, according to a report released Tuesday. The agency forecast an average retail price of $2.78 a gallon for regular unleaded gasoline in the April to September summer driving season this year, up from an average $2.07 for the summer season in 2020 when the pandemic curtailed travel. The EIA also raised its expectations for West Texas Intermediate crude prices by 2.9% from the previous forecast to $58.89 this year and by 3.6% to $56.74 next year. U.S. crude production, meanwhile, was seen at 11.04 million barrels a day this year, down 0.9% from the previous forecast. For 2021 the EIA cut its output view by 1.3% to 11.86 million barrels a day. On the New York Mercantile Exchange, May West Texas Intermediate oil was up 91 cents, or 1.6%, at $59.56 a barrel.
Crude oil prices strengthened Tuesday, rebounding on signs of a global economic recovery even with the market set to received additional supply in the next few months. By 9:20 AM ET (1420 GMT), U.S. crude futures traded 1.8% higher at $59.70 a barrel, while the international benchmark Brent contract rose 1.6% to $63.14. U.S. Gasoline RBOB Futures were up 1.6% at $1.9922 a gallon.