Summer 2000 Motor Gasoline Outlook

Summer 2000 Motor Gasoline Outlook

Summary

For the upcoming summer season (April to September), motor gasoline markets are projected to exhibit an extraordinarily tight supply/demand balance.

Retail gasoline prices (regular grade) are expected to average $1.46 per gallon, 25 percent higher than last summer’s average of $1.17 per gallon. That projection also exceeds the previous (current-dollar) record summer average of $1.35 recorded in 1981. Nominal prices are expected to reach a peak of $1.52 per gallon in April—a new record--and decline steadily to $1.39 per gallon by September due to the impact of increases in world-wide crude oil production. These projections presume no disruptions of refinery motor gasoline production.

The record price projected for April, after adjusting for inflation, is approximately 40 percent below the peak reached in March 1981. Subsequent adjustment for fuel efficiency increases since then results in about a 60-percent cost reduction over the same period.

Demand is projected to average 8.72 million barrels per day, up 130,000 barrels per day, or 1.5 percent, from last summer. Even though that represents a new summer season record, that growth is well below the average of previous summers.

Motor gasoline stocks are currently low and are projected to remain relatively low throughout the driving season. Total beginning-of-season (April 1) stocks are sharply below last year's levels and are near the low end of the normal range. The average projected finished motor gasoline stock draw this summer is 23,000 barrels per day, less than half that of the previous summer.

Total domestic output (refinery and field production) is projected to average 8.40 million barrels per day during the summer months, up almost 190,000 barrels per day from last summer. Refineries will be expected to meet not only the 130,000 barrels-per-day increase in demand but also to accommodate the reduced availability from stocks and net imports. As a result, refinery utilization rates for the summer are projected to average 96.8 percent, up from 94.3 percent last summer.

Net imports of finished motor gasoline are projected to average 295,000 barrels per day, down from 327,000 barrels per day last summer. This reflects the projected lower availability of supplies from Europe and uncertainties about foreign refiners’ ability to meet Phase II reformulated gasoline specifications.