November 24, 2010
(Next Release on December 1, 2010)
Gasoline Price Pass-Through
Petroleum products typically change hands several times between
production at the refinery and eventual consumption. Product prices
increase with each intermediate sale, as each participant along the
supply and marketing chain incurs costs and seeks to make a
profit.
The spot market is often the first pricing point for petroleum
products. At this level, sales of product for immediate delivery
take place at a convenient transfer point, such as a refinery,
port, or pipeline junction. The spot price for a product reflects
the cost of crude oil and other inputs to refiners as well as the
costs and profits of processing that crude oil into products. Spot
price changes for crude oil and refined products are almost
simultaneous, as shown in Figure 1. However there is a discernable
lag between product spot price change and retail price change.
Figure 1. Crude oil and refined product
spot prices typically
move together
When consumers hear about crude oil or product spot prices
rising, they expect their retail product prices to rise. As shown
in Figure 2, significant changes in product spot prices usually
lead to changes at the retail level. EIA estimates made with a
distributed lag model show that, at a regional level, the price
pass-through from the spot to the retail market is complete within
2½ months, with about 50 percent of the change occurring within two
weeks and 80 percent within four weeks.
Figure 2. Retail prices follow spot prices,
with a time delay
Retail gasoline and diesel prices decrease
The U.S. average retail price for a gallon of gasoline dropped for
the first time in three weeks, decreasing about one and a half
cents from last week to $2.88 per gallon, $0.24 per gallon higher
than last year at this time. The decline was sharpest in the
Midwest, where prices were a nickel lower than last week. Gulf
Coast gasoline prices fell three cents from the week before,
followed by the Rocky Mountains where prices were down over a cent.
Prices on the West Coast were flat, remaining at $3.11 per gallon,
the highest in the country. In a week where prices were generally
lower, the East Coast saw prices jump almost two cents versus last
week.
The average retail diesel price was down more than a penny
versus last week, with the national average for a gallon of diesel
now at $3.17 per gallon, $0.38 higher than last year at this time.
This was largest decrease in the national average in 12 weeks.
Prices fell across all of the major regions, led by the East Coast
where prices fell one and a half cents from last week. The Gulf
Coast, Rocky Mountains, and West Coast all saw declines equal to
the national average decrease, while the Midwest was also about a
penny lower than last week. Prices on the West Coast remained the
highest in the country at $3.32 per gallon.
Residential Heating Fuel Prices Decrease
Residential heating oil prices decreased during the period ending
November 22, 2010. The average residential heating oil price
decreased by approximately $0.02 per gallon last week to reach
$3.11 per gallon, an increase of $0.36 per gallon from the same
time last year. Wholesale heating oil prices decreased by $0.09 per
gallon last week, reaching a price just shy of $2.36 per gallon.
This is a $0.31 per gallon increase from last year's price.
The average residential propane price increased by $0.03 per
gallon to reach $2.55 per gallon. This was an increase of $0.28 per
gallon compared to the $2.27 per gallon average from the same
period last year. Wholesale propane prices decreased by $0.05 per
gallon from about $1.32 per gallon to $1.27 per gallon. This was an
increase of approximately $0.07 per gallon when compared to the
November 23, 2009 price of $1.20 per gallon.
Propane Inventories Drop
U.S. inventories of propane experienced a drop of 0.5 million
barrels last week to end at 64.2 million barrels total. The Midwest
regional stocks fell by 0.4 million barrels while the East Coast
region drew 0.1 million barrels of propane. Inventories in the Gulf
Coast region were down slightly. The Rocky Mountain/West Coast
region added to their stocks slightly. Propylene non-fuel use
inventories represented 3.3 percent of total propane
inventories.
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This Week In Petroleum
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