It’s late April… the ‘summer driving season’ is still a month away and gasoline inventories in the United States are low. Really low. Because of this, CNN is reporting that at least parts of the US are going to see four dollar gasoline at some point this summer, and this is just from normal supply/demand issues. Geopolitical issues and/or a hurricane or two getting into the Gulf of Mexico could mean that four bucks a gallon is only a waypoint on gasoline’s road to five dollars per gallon or higher. So much for the earlier happy talk that gas prices would average less than three dollars this summer.
According to CNN’s story, US refineries are operating at around 88% of capacity (without explaining why), and gasoline stocks are still dwindling. Considering both the threat to the economy high gas prices poses, as well as the money-making opportunity these prices represent, I’m surprised that the refineries aren’t going full-bore. Perhaps it has something to do with PEMEX being unable to deliver the expected amount of crude to the USA? You can’t refine what you don’t have enough of…
Inventories are very low, no one can doubt that. On a Days Supply basis, the situation is even worse. That said, there are 5 weeks until the Memorial Day weekend (the unofficial start of the peak driving season). The bottom end of the average range at the end of May is 208.6 MMB, or about 14 MMB above where we are right now. So, we would need to see an average build of 2.5-3.0 MB each week over the next 5 weeks just to get back to the bottom end of the average range. Is this possible? Yes. Is it likely? I better leave that answer to others. But we need to see imports stay high (emphasis mine) and start seeing more gasoline production (from higher crude refinery inputs), which means we can’t afford to continue seeing more refinery outages, if we have any chance of reaching that target at all.
By the way, I would have expected to see inventories increase as well.
Good luck to us on all that. I’m heading out on a short road trip this weekend and am glad to be doing so when gasoline prices are still relatively cheap.
I’ve also noticed a lot more new large trucks and SUV’s in the parking lot at work and wonder how all of these people will react when their weekly commuting costs double later this summer… it’s distinctly possible that this will happen.