The average retail price for motor gasoline this summer (April through September) is expected to be $ 2.67 per gallon, the lowest price (in real dollars, meaning adjusted for inflation) since 2009, based on projections in EIA’s July (STEO). This decline is mainly the result of the projected 41% year-over-year decline in the average price of North Sea Brent crude oil.
Travel and gasoline consumption are expected to be higher this summer compared to levels in 2014. Motor gasoline consumption is expected to increase by 194,000 barrels per day (b/d), up 2.1% from last summer, reflecting higher real disposable income, substantially lower retail motor gasoline prices, and higher employment and consumer confidence.
Driving this summer (as measured by vehicle miles traveled) is expected to be 2.2% higher than last summer, the largest year-over-year summer increase in 11 years. The increase in highway travel is not just a response to the drop in gasoline prices. Real disposable income is projected to be 3.6% higher than last summer, the largest year-over-year increase in nine years. Nonfarm employment is projected to rise 2.1%, the largest such increase since 2000.
EIA uses product supplied, which reflects refinery and blender output, inventory change, and net imports, as a proxy for consumption. Growth in net refinery and blender output of motor gasoline is projected to slightly exceed that of consumption, increasing by 208,000 b/d. Primary inventories of finished motor gasoline and gasoline blending components began the summer season 10.7 million barrels above the previous five-year average, and are expected to end the season 3.7 million barrels above the previous five-year average. The projected 14.3 million barrel draw on gasoline inventories this summer compares with an 8.4 million barrel draw last summer. The increase in production and larger inventory draw contribute to an expected 62,000 b/d decline relative to last summer in the net imports of motor gasoline and blending components.
Principal contributors: Michael Morris, Tancred Lidderdale