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U.S.: No Relief at the Pump in 2012?

ByThe National Bank of Canada
Published 02/12/2012, 12:52 AM
Updated 05/14/2017, 06:45 AM
CL
-1.64%

The U.S. Department of Energy released its latest Energy Outlook this week. The report provided forecasts for the average price of West Texas Intermediate (WTI) of $100.40/Bbl in 2012 and stated retail prices for gasoline will reach a seasonal peak of $3.65 per gallon in Q2. This price of gasoline is 7% lower than prices observed for the same period last year. However certain trends suggest that there is a risk that gasoline prices will surge above $4.00 per barrel in 2012. In today’s Hot Charts we focus on two key variables pointing to record high gasoline prices. We look at the relationship between gasoline prices and stock. In the current period of seasonal stock accumulation, gasoline prices reached record highs in a month of January. This is due to the fact that the sum of crude plus the cost of refining is at a record for a January month. With crude prices close to the DoE forecast of $100.40/Bbl relief could only come from a contraction in the cost of refining. However, the cost of refining crude oil is likely to remain elevated as refiners seasonal maintenance gets underway. Adding to upward pressure is the reduction in refining capacity in Northeast region of the U.S. where up to 50% of regional capacity has become idle as of Q4 2011. Yes, refiners from North East U.S. supply a diminishing market share of products in the region but they still account for 40% of the gasoline sales. With U.S. economic activity strengthening, the stage is set for higher gasoline prices in the coming months.

US No relief at the pump in 2012

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