U.S. gasoline prices post highest levels in nearly a decade in late November

U.S. average pump window prices at service stations for regular unleaded gasoline on the Monday before the U.S. Thanksgiving holidays this year were on average $3.40/gallon, the highest in about a decade, according to the U.S. Energy Information Administration.

Image courtesy of IADE-Michoko/Pixabay

This year’s average price during the days ahead of the Thanksgiving Day holidays in late November was a 62% on-year increase. It was the highest pre-Thanksgiving holiday average gasoline price in the U.S. since 2012 in nominal terms, the agency said on Nov. 24 in its Gasoline and Diesel Fuel Update.

Darren Woods, Exxon Mobil’s CEO, said prices rose in 2021 in part because of refinery closures during the pandemic that limited supply.

Unleaded gasoline futures as published by the CME Group in early December showed some price stability into the first quarter 2022 but with higher values going into the summer 2022 season.

Largest recorded annual increase

U.S. fuel pump prices at service stations just ahead of the late November Thanksgiving driving season were 82 cents/gal, a third more than two years ago.

October 2021 saw the “largest recorded” on-year increase in gasoline prices, at $1.13/gal, since the agency started to register gasoline prices in 1990, the EIA said.

“Typically, U.S. retail gasoline prices follow a seasonal trend: prices increase in late summer when people drive more frequently and then decline going into the winter months,” it said.

“This year, gasoline prices did not increase in September but instead rose 20 cents/gal in October before leveling off in November,” it added.

The Energy Information Administration (EIA) projects gasoline prices will fall 5% in December from November and stay close to $3/gal through the first half of 2022.

Gasoline prices

U.S. gasoline prices as of November were as usual highest on the West Coast.

Holiday gasoline prices in California broke a record Just ahead of the Thanksgiving driving with an average price tag of nearly $4.69/gallon on Nov. 16, according to USA Today.

Average prices in California in late November were well above $4/gallon, according to the AAA motor club. 

The lowest U.S. gasoline prices in late November were in the U.S. Gulf Coast, at just over $3/gallon, according to the AAA, which tracks fuel price changes.

Retail gasoline prices across the U.S. vary because of regional supply and demand differences, gasoline specifications, logistical constraints, and taxes, the AAA said.

West Texas Intermediate crude oil futures for front-month delivery have seen much volatility in 2020-2021 with values as extreme as a negative $37.63 per barrel on April 20, 2020 to a high of $84.05 per barrel on Nov. 1, 2021. Crude oil prices turned negative briefly in April 2020 during the lockdowns.

During 2021 U.S. driving has increased but still lags behind pre-Covid levels, according to the AAA. About 53.4 million people will travel for the Thanksgiving holiday, 13% more than in 2020, and 5% less than in 2019, it estimated.

RBOB futures

Reformulated blendstock for oxygenated blending (RBOB) future prices, as quoted by the CME Group, have seen a retreat in early December from late October. RBOB, or unleaded gasoline, is the most common benchmark for gasoline trading in the U.S.

The contract for RBOB January delivery traded in early December at about $1.96 per gallon, down from about $2.40 during the last week of October.

Through RBOB futures trading investors “express views on energy price expectations and consumer behavior,” according to the CME Group. The RBOB contract trades in units of 42,000 gallons.

RBOB futures for February and March delivery were similar to January as they also trended toward an increase later in 2022 toward the summer. Gasoline prices seasonally rise as summer approaches in part due to summer travel demand but also as the mix is adjusted to warmer weather.

About 10% to 15% of the final consumer gasoline at the pump product dispensed at pumps is ethanol.

The front-month ethanol contract was quoted by the CME Group during Dec. 2 at $2.21 per gallon, higher than the future quotes for coming months at $2.14/gallon. Ethanol future prices have doubled compared with April 2021.

Ethanol is a government-mandated component mainly to help a cleaner combustion and help lower pollution.

Clear recovery in gasoline

ExxonMobil’s CEO Darren Woods described the 2021 gasoline market as showing a “clear” recovery  with respect to economic activity. This is reflected in both consumption and pricing, he said. Supply increases were limited by refinery closures during the pandemic, he said.

“Primary transportation fuels, I'd say, road transport, commercial transport, heavy-duty transport, those are getting back to where they were historically” while jet fuel still lags, he said. Jet fuel has traditionally been one of the most profitable refinery products but 2020-2021 changed that with a comeback seen in late 2022.

“But our view is this: the downstream business, when it has a peak or goes through a tight supply/demand balance, it doesn't last very long,” he said.

By Renzo Pipoli