U.S. average gasoline prices reach $4.85 per gallon in early June, more than anticipated

U.S. gasoline prices surged in early June 2022 from a week earlier by over a quarter of a dollar during a spring holiday known as Memorial Weekend that took the average fuel pump reading nationwide to about $4.85 per gallon, with drivers in several states paying more than $5 per gallon and Californians over $6. RBOB future contract prices after July show backwardation.

“People are still fueling up, despite these high prices,” said Andrew Gross, with the American Automobile Association, or AAA, according to a June 6 publication.

The actual prices of the first week of June 2022 were higher compared with a second quarter 2022 gasoline pricing projection published by the Energy Information Administration (EIA) in March. It had estimated average prices would reach $4.10 per gallon.

In the U.S. the gasoline mix is a combination of RBOB, a gasoline blend, with an oxygenate, like ethanol. The mix results in the finished reformulated gasoline sold in service stations across the nation. The gasoline mix sold in U.S. stations typically includes about 10% ethanol.

A reading of RBOB future prices in the U.S. on June 7 showed lower values for RBOB future contracts starting after July 2022. As the calendar of contracts advances, starting in August, there is a market backwardation. Gasoline prices seasonally ease into the fall and winter. The warmer months typically see the greatest gasoline demand with spikes in the extended weekends.

Gasoline stocks fell, demand rose 

Total domestic gasoline stocks fell by 700,000 barrels to 219 million barrels last week, the AAA said citing the EIA.

Meanwhile, gasoline demand expanded from 8.8 million barrels per day to 8.98 million barrels per day as drivers prepared for Memorial Day weekend travel, according to the AAA.

The national average for a gallon of gasoline as of June 6 was $4.86 per gallon, a 59-cents monthly increase, and $1.81 per gallon more than a year ago, the AAA said.

The nation´s biggest weekly increase was in Michigan, where prices rose 45 cents. The AAA reported weekly gains of over 30 cents per gallon in the central states Illinois, Indiana, Wisconsin, Ohio, Nebraska, Kentucky, Colorado, Minnesota and also in Texas.

California was the most expensive gasoline market with $6.34 per gallon average prices, followed by Nevada at $5.49 per gallon, Hawaii at $5.47 per gallon, and Oregon at $5.41.

The view at GasBuddy

According to GasBuddy, which like AAA also tracks weekly changes for U.S. gasoline, the U.S. average gasoline price has increased for an eight straight week. GasBuddy estimated average nationwide gasoline prices at $4.85 per gallon, according to information available on June 6 in the website´s blog.

“Gasoline inventories continue to decline even with demand softening due to high prices, a culmination of less refining capacity than we had prior to Covid and strong consumption, a situation that doesn’t look to improve drastically anytime soon,” according to GasBuddy´s website blog.

“In addition, diesel prices also stand at a record high, a second gut-punch to consumers which pushes prices of most goods higher,” GasBuddy said.

Crude oil doubled

“The cost of a barrel of oil is nearing $120, nearly double from last August, as increased oil demand outpaces the tight global supply,” said on June 6 the AAA, which has over four million members.  

“The market is still concerned that supply could remain tight as the European Union works to implement a 90% ban on Russian oil imports by the end of this year,” the AAA said.

Additionally, prices were boosted after the EIA reported that total domestic stocks decreased by 5.1 million barrels to 414.7 million barrels, it added. “The current storage level is approximately 13.5% lower than a year ago,” it said.

AAA estimated nearly 35 million travelers were going to be driving during the 2022 Memorial Day holidays in the highest number for this holiday since 2019. 

RBOB Futures backwardation after July

RBOB (Reformulated Blendstock for Oxygenated Blending) future settlements indicate there is backwardation, or stronger prices in the front months and weaker prices in delivery contracts after July as the months advance into the fall of 2022.

Seasonally, U.S. gasoline prices tend to increase in warmer months and then decline in the fall in part as the gasoline mix changes due to weather-related adjustments.

According to data from CME, a marketplace where instruments like options and futures are traded, as of June 6, the RBOB futures contract for delivery in July 2022 settled at $4.19 per gallon, with the contract for delivery in August 2022 at $3.99 per gallon, and with the backwardation continuing in September, October and in later months.

As of early June 7, the front month contract, or the July 2022 contract, traded at about $4.30 per gallon with the August contract at $4.07 per gallon and the September contract at $3.86 per gallon. RBOB futures are traded in the CME in contract units of 42,000 gallons.

In 2021, the driving around the holiday of Thanksgiving saw higher prices in comparison with previous Thanksgiving holidays.

In March 2022 the U.S. Energy Information Administration (EIA) projected that U.S. regular gasoline retail prices would average $4.10 per gallon in the second quarter of 2022 in what it said would have been the highest not-adjusted-for-inflation level since 2008.

U.S. gasoline consumption averaged 8.8 MMbpd in 2021.

(Reporting by Renzo Pipoli)

Related News

From the Archive

Comments

Comments

{{ error }}
{{ comment.comment.Name }} • {{ comment.timeAgo }}
{{ comment.comment.Text }}