Source: U.S. Energy Information Administration (FEB 2014)
By Patricia L Johnson
The above graphics from the U.S. Energy Information Administration represent the various costs that go into a gallon of gasoline and a gallon of diesel as of January 2014. If you’ve filled up lately you already know that the prices listed for January 2014 are a bit low as both the price of gasoline and diesel have increased over the past month.
Why does the price of gasoline fluctuate so much in this country?
As you can see by the above graphic crude oil is the most significant cost at 67% in gasoline and 57% in diesel, what that basically means is our costs are going to rise and fall based on the price of crude and the law of supply and demand.
US imports have declined considerably and petroleum products now represent only 40% of our imports. 84 percent of the oil we imported in November of 2013 was imported from one of following five countries:
- Canada (34%)
- Saudi Arabia (21%)
- Mexico (13%)
- Venezuela (10%)
- Kuwait (5%)
According to the Department of Energy there are at least seven factors that have an effect on imported crude oil prices as follows:
- Supply: Non-OPEC
- Supply: OPEC [energy prices, supply capacity, geopolitics, and weather]
- Balance: OECD inventories & WTI futures spread [inventories]
- Spot Prices:
- Financial Markets: [spot prices, futures, options, spreads, swaps, commodity prices, currency exchange rates and interest rates]
- Demand: Non-OECD
- Demand: OPEC [economic growth, industrial production, both goods and personal transport and weather]
There are a few known factors that have increased our most recent price. Gasoline consumption grew by 1.1% [100,000 bbl/d] in 2013, the largest increase since 2004. In addition outages in Libya, Nigeria and Iraq have affected the OPEC supply. It wasn’t until January of this year that El Sharara oil field in Libya was back in operation and it has now closed once again, over the weekend, due to protests.
Last, but certainly not least is the weather. The extraordinary cold weather this country has experienced this season has created increased use of heating oil, propane, etc. In 2012 the Department of Energy published data indicating various products by percentage of use and top five uses are as follows:
- Gasoline (47%)
- Heating Oil/Diesel Fuel (20%)
- Jet Fuel/Kerosene (8%)
- Propane/Propylene (6%)
- NGL & LRG (6%)
Now that the Keystone pipeline is complete (aside from the XL portion) Canada’s exports of bitumen to the U.S. have increased by more than 4 percent during the 4th quarter of 2013. The NEB (Canadian National Energy Board) stated an average of 687,000 barrels was exported to the US each day. Imports to PADD II were 4.5% higher than in the 3rd quarter, but Cushing stockpiles dropped 5.96 million barrels during the three weeks ended 02/14/2014.
Latest data indicates all PAD District inventories are down including the SPR, compared to last year, so it’s very likely the price of gasoline and diesel will continue to rise in the near future.
© 2014 Patricia L Johnson
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