Are you ready to rev up your engines and hit the road? Well, buckle up because we’re taking a wild ride through the world of gasoline demand and supply! Get ready to fuel up and join us on a journey that’s filled with bumps, twists, and some unexpected turns. We’ll explore the highs and lows of gasoline stocks, the surge in demand, and what it all means for the price you pay at the pump. So, grab your keys, fill up your tank, and let’s hit the gas pedal!
Pump Up the Volume: A Look at Gasoline Demand and Supply
Hey there speedsters! Hold onto your seats because the US gasoline market is taking us for a wild ride in 2023! As of April 14, 2023, gasoline stocks are at a five-year low of just 223,544 barrels, which is a real drag compared to the record-breaking supply we had just three years ago. It’s like hitting a speed bump on the highway of life!
Refinery production and imports are slowing down too, which is not good news for our fuel tanks. We might see an uptick in gas prices in the coming weeks, so keep your eyes on the road and watch those digits at the pump.
Demand for gasoline is also still revving up as well and ready to go! It’s currently in line with the last three months and trending towards the higher end of gasoline consumption for the last five years (chart below). People are hitting the road more frequently with the ongoing economic recovery, increased travel activities, and a preference for personal vehicles over public transportation. In fact, we saw the highest consumption in July of 2021.
Speaking of July, with the summer driving season fast approaching, we can expect gasoline demand to shift into high gear. This could further tighten supply and drive prices upward, leaving drivers feeling the pinch at the pump.
The Summer Spike: Understanding Gasoline Demand During Peak Season
Ready for some summer fun on the road? The summer driving season is almost here, and it’s the perfect time to hit the open road, explore new places, and make memories. But as more people take to the road, there’s a sharp increase in gasoline consumption, which can impact prices and supply. So, let’s take a closer look at what to expect during this peak season.
Peak period for gasoline consumption typically falls between Memorial Day and Labor Day, with the highest demand occurring in July and August. During this time, gasoline prices tend to rise as supply struggles to keep up with demand. In fact, in July of 2021, over 10 million bbls of gasoline were consumed per day, which is almost 18% higher than current levels. However, it’s not just about road trips. People also tend to drive more for local activities, such as going to the beach, attending festivals, or simply enjoying the warm weather.
To understand the seasonal trends in gasoline consumption, we can look at the chart above. Currently, we’re in a period of decreased demand following spring break, which the Department of Energy reports as being on week 15 in green on the chart. However, the first week of May typically marks the start of a steady rise in gasoline consumption that continues through Labor Day. During this period, gasoline demand is in line with the peak driving season and tends to be towards the higher end of gasoline demand.
Revving Up for the Summer: Gasoline Prices and Taxes to Keep in Mind
As the sun heats up and people hit the road for vacations, the summer driving season not only leads to an increase in gasoline consumption but also a rise in gasoline prices. Our chart shows that on average, gasoline prices shoot up by a staggering 17.5% from January to the summer driving season. It’s not just the increased demand for gasoline that causes prices to surge, but also the cost of producing and distributing it. During the peak summer months, gasoline prices tend to reach their highest point, burning a hole in your wallet.
But wait, there’s more! The cost of crude oil, which is the primary ingredient in gasoline, also tends to increase during the summer months. Refineries switch to producing more expensive summer-blend gasoline, driving up prices even further. On top of the cost of gasoline, fuel taxes also contribute to the final price that consumers pay at the pump.
Source: Federal Highway Administration
According to the latest Federal Highway statistics, there are 18.4 usc/gal in Federal tax plus State fuel taxes. This means that fuel taxes can add a significant amount to the final cost of gasoline, particularly during the summer driving season when prices are already high. We have included a chart of the Federal Highway statistics gasoline fuel taxes by state in our analysis, which shows the varying tax rates by state.
For instance, if you’re filling up your tank in Washington state, you’re looking at a whopping 67.8 per gallon thanks to a state tax of 49.40 + 18.4 Federal tax. But don’t worry, there’s always a chance that the tax rates have changed since the 2021 Federal Highway statistics, so it’s important to check with your local government to confirm the current rates. Who knows, maybe next time you fill up, you’ll be in for a pleasant surprise.
Rapid Price Increases and Summer Drops: Analyzing Gasoline Stocks and Seasonality
Stocks, demand, seasonality, and taxes. Sounds boring, right? Hold on tight because we’re about to take this topic on a wild, thrilling ride! In the last section, we talked about how summer driving season affects gasoline prices, but now let’s get into the nitty-gritty of what really makes the gasoline market tick.
Let’s start with stocks. Gasoline stocks, that is. You might be wondering why they matter, but trust us – they do. In a perfectly functioning market, gasoline supply should meet demand. However, in recent years, gasoline stocks have been declining, which is cause for concern. So, we delved into data from the 1980s on New York Harbor conventional gasoline prices to see what we could find.
Well, well, well, here’s our first interesting stat for you! According to our research, there have been four years in the last 33 where current stocks in April (week 15) were lower than the previous week 15 the last five years . Those years were 1996, 1997, 2001, and 2007 ( above). Based on this data , we can calculate that there’s roughly an 12% chance of this occurring in week 15. So, if you’re feeling lucky, go ahead and bet on it! (Just kidding, please don’t gamble with your life savings.)
Seriously though, as more drivers hit the road, refineries and importers tend to increase their inventory. We can see this trend by looking at the period from 2001 to 2007 showing higher stocks over those 6 years by about 5 million bbls on 4-13. The current 2023 environment is very usual to see stocks below levels five years ago, and why we have seen this event occur only in approximately 1 out of every 8 years in our data set this early in April. The last event like this occurred more than 16 years ago!!!
Shocking Truth About Gasoline Prices: How Low Stocks in April Lead to Price Surges and Summer Savings
Hold onto your gas tanks, folks, because another finding will blow your mind! Get this: in 3 out of 4 years where gasoline stocks were low in April (week 15), we saw a price increase of over 20% prior to May. That’s right, you heard me – 20%! And the increase peaked around Memorial Day, just in time to ruin your holiday plans. But wait, there’s more! These price spikes were totally different from the historical price average of the last 37 years, where prices would peak around weeks 20 and 21 without going up more than 20%.
But don’t worry, it’s not all bad news. We also discovered that while gasoline prices historically tend to hold steady across the summer driving season, the years we identified (3 out of 4) saw decreases in prices during this time. So, maybe you can finally afford that road trip you’ve been dreaming of… as long as you’re willing to wait later in the summer or pay the higher prices beforehand.
Take a gander at these two snazzy charts, you’ll notice that the US Gulf is actually getting high on life – I mean, on the historical average – by almost 20% compared to New York Harbor average at 17.5%! Talk about living your best life, am I right?
And don’t even get me started on Los Angeles RBOB prices – those babies go up in the summer like it’s no one’s business, with a 25% spike since way back in 2003. Both regions went wild in May, just like New York, but even higher, breaking the charts at a whopping 60% and 50% before finally settling down in 2007.
Overall , the historical data suggests that we may be in for some rapid price increases earlier than usual, particularly May 2023.
Pumping Up the Data: The Link Between Gasoline Supply and Economic Conditions Unveiled
Our team of analysis wizards has been crunching numbers like crazy to see if there’s a link between gasoline supply and economic conditions. And what did we find? Well, hold onto your hats, because it’s a real gasp-worthy revelation.
First off, we noticed that two out of the four years with lower-than-average gasoline stocks coincided with some serious recession action in 2001 and 2007. This could mean that a lack of fuel could be a sign of an impending economic downturn. And get this – in half of the recessions we looked at in our data range, gas stocks were at a five-year low. Talk about a fuel for thought!
Now, let’s talk timing. Timing is everything, especially when it comes to the economy and gasoline prices. In 2001, the recession began revving up in March and didn’t let off the gas until November, causing gas prices to take a nosedive. But in 2007, the recession hit the scene in December, like a last-minute party crasher, and affected gasoline prices in a completely different way. It was like a game of economic pinball, with prices bouncing around unpredictably.
Interestingly, both years saw a spike in gasoline prices in May, but by the end of the summer season, prices had dropped. This is a bit different than the average, where prices tend to stay strong throughout the summer and peak towards the end of the season.
In 1996 and 1997, there were some major events that shook things up in the gasoline game our non-recession years. OPEC (you know, the oil folks) cut back early 1996 on production by a whopping 6%, which jolted oil prices out of their oversupply stupor. In April gas stocks were the lowest in five years , and this trend continued into 1997.
But this story seems to be revving up again! In April of 2023, OPEC announced production cuts aimed at boosting oil prices : Source. Will this impact gasoline supply and prices? Only time (and more data analysis) will tell. So stay tuned, folks, because we’re not pumping the brakes on this gasoline investigation anytime soon!
Conclusion
In summary, it looks like we’re in for a bumpy ride when it comes to gasoline prices! Based on our analysis of historical data, it appears prices will sharply increase until late May or early June, followed by a subsequent decrease until mid-August. But that’s not all – our research also suggests that gasoline supply could be linked to economic conditions, so a drop in stocks could signal an economic downturn.
And let’s not forget about the present. 2023 has already seen a significant price increase of over 20% YTD, which is in line with our identified trends. This means that consumers and businesses should prepare for the possibility of further price hikes in the near future and some relief in the middle of the summer.
At Sova Analytics, we’re committed to providing timely and valuable insights on gasoline prices and supply trends. We’ll continue to closely monitor the market and update our charts accordingly. So be sure to follow us on Twitter at @sova_analytics to stay in the know!
By keeping up with market trends and using data to make informed decisions, consumers and businesses can better manage their energy costs and stay ahead of potential economic shifts. So, fuel up your knowledge tank and get ready for the ride ahead!