AAA Fuel Gauge Report | August 27, 2012
(WASHINGTON, August 27, 2012) Today’s national average price for a gallon of regular self-serve gasoline is $3.75. This price is three cents more expensive than one week ago, 26 cents more expensive than one month ago and 15 cents more expensive than this day in 2011. The national average has increased for 49 of 55 days and increased 42 cents from the summer low of $3.33 on July 2. For eight consecutive days, the national average price has set a new all time record for the calendar day. Motorists in five states are now paying an average price at the pump of more than $4.00 per gallon: Hawaii – $4.28, California – $4.14, Washington – $4.02, Oregon – $4.01, and Connecticut – $4.00.
Gas prices in 2008 and 2011 – the respective second and third highest prices each day during this streak – moved lower from Labor Day through Christmas. However, it is worth noting that in 2008 prices in mid-September temporarily moved higher as Hurricane Ike drove the national average 20 cents higher from September 9 to September 17 before prices fell dramatically through the end of the year. The prices during that spike could potentially be higher than the daily prices this year during that same time period, which would break the current streak of daily record highs, but any end to the stretch would likely be brief. The 2012 daily price is likely to continue to set new all time highs heading into the fall. Included below is a comparison of the daily national retail average price for 2008, 2011 and 2012 to date.
Beginning in July, gas prices increased largely as a result of more expensive crude oil prices and stronger demand during the busy summer driving period. In August, the national average price at the pump has climbed as crude prices have taken a back seat to regional prices. To begin August, prices in the Midwest surged following supply disruptions, most notably a spill on the Enbridge pipeline in Wisconsin. As the pipeline was successfully restarted and upward pressure on pump prices in Midwestern states eased, a fire at the Chevron refinery in Richmond, California sent West Coast prices sharply higher on the expected impact to West Coast supply. These supply concerns have been largely priced into markets in that region, however this week begins with yet another story set to impact regional prices, as the Southeast U.S. and Gulf Coast brace for the impact of Tropical Storm Isaac which currently is expected to make landfall as a Category 1 or 2 hurricane.
Gasoline prices in the Gulf Coast region moved higher last week as traders closely monitored Tropical Storm Isaac. However, these concerns gave way to demand worries to end the week and prices on Friday were slightly lower. This changed over the weekend as gasoline spot prices turned sharply higher following announcements that several refineries in Eastern Louisiana and Mississippi had announced planned temporary closures in advance of the storm and markets priced in the expected impact on supply. As of this afternoon four major refineries, totaling more than one-million barrels per day of refining capacity, have announced their planned closure. These refineries make up about half of the production capacity in the region where Hurricane Isaac is expected to make landfall. The map below of capacity in Western Louisiana and Mississippi includes the major refineries that have already announced their planned closure in preparation for the storm.
Isaac is expected to impact Gulf Coast refineries as well as offshore crude production in the region. However, with refineries responsible for the bulk of crude oil demand, refineries being offline would be expected to pressure oil prices lower as was the case today. Also pressuring prices lower was continued bearish economic news and reports that the Administration was again considering tapping the Strategic Petroleum Reserve (SPR) in the wake of the storm.
Rising gas prices and sanctions with Iran had seen recent calls for a release from the SPR, however AAA does not support this action at this time. The Reserve is designed to be a tool to protect American motorists from emergency disruptions to supply and distribution, not as a response to high prices due to non-emergency supply and demand market fundamentals. The impact on global supply caused by the Iran sanctions policy does not meet that condition at this time, and the ultimate impact on supply and distribution from Hurricane Isaac remains to be seen.
West Texas Intermediate (WTI) crude oil has stayed above $90 per barrel this month for all but the first two days of August after settling as low as $77.69 on June 28. This streak continued today, however the price of WTI declined 68 cents to settle at $95.47 per barrel at the close of formal trading on the NYMEX. This marks three straight trading days of declining oil prices.