A 40 percent decline in crude oil prices has resulted in the lowest gasoline prices this summer since 2009, according to a report issued by the Energy Information Administration (EIA).
EIA estimates that the average retail price for motor gasoline between April and September is expected to be $2.67 per gallon. RBOB gasoline for August delivery lost $0.0718 to settle at $1.8589 per gallon on July 15, and August NY Harbor ULSD dipped $0.056 to $1.6693 per gallon.
"Travel and gasoline consumption are expected to be higher this summer compared to levels in 2014," an EIA report stated. "Motor gasoline consumption is expected to increase by 194,000 barrels per day (b/d), up 2.1 percent 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 percent higher than last summer, the largest year-over-year summer increase in 11 years. EIA reports that real disposable income is projected to be 3.6 percent higher than last summer, the largest year-over-year increase in nine years — another factor in the increase in travel.
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.
Crude oil futures for August delivery on the NYMEX ended at $51.41 per barrel on July 15. The recent decline in price comes after the announcement of an agreement between Iran and six countries regarding Iran's nuclear program and the lifting of sanctions against Iran.
Some analysts agree that first Iranian oil exports could enter the global market in early 2016, but estimated additional volumes vary between 300,000 bpd and 700,000 bpd. Traders are also watching China, which has seen slowing growth. China reported 2nd quarter growth at an annual rate of 7 percent, steady to the previous quarter.
Oil prices slumped even though U.S. crude inventories fell 4.3 million barrels last week, according to EIA, as refiners boosted throughput to a record level. Crude stocks increased at Cushing, Oklahoma.
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.