Beefed up crude oil inventories combined with sluggish global economic growth are expected to keep diesel and gasoline prices low at least in the near term, according to the Energy Information Administration (EIA).
Those factors are also expected to keep U.S. crude oil prices at or below $30 per barrel in the near term, especially as the potential for additional crude oil supply only continues to grow.
EIA said crude oil and petroleum product inventories, both domestically and internationally, have been growing since mid-2014 and are above five-year averages for this date, with total U.S. commercial crude oil inventories as of January 29 hovering at 503 million barrels; 132 million barrels above the 2011-15 January average and the first time that U.S. inventories exceeded 500 million barrels.
Total U.S. distillate inventories, which notably include heating oil and diesel fuel, are 22 million barrels above the five-year average.
On top of that, EIA noted ultra-low sulfur diesel (ULSD) inventories in the U.S. have grown more than total motor gasoline inventories since mid-2014. Correspondingly, the discount of the front month gasoline contract to the futures contract for delivery one year in the future is significantly less than the discount for ULSD, the agency added.
As a result, the retail U.S. average price for both diesel and gasoline continues to fall.
Diesel dropped 2.3 cents this week to a U.S. retail average of $2.008 per gallon, which is 82.7 cents per gallon cheaper compared to the same week in 2015.
In four regions of the U.S., diesel is below the $2 per gallon mark, EIA noted:
- The Lower Atlantic: $1.959 per gallon, down 3.3 cents from last week
- The Midwest: $1.929, down 1.2 cents
- The Gulf Coast: $1.896, down 2.1 cents
- The Rocky Mountains: $1.914, down 5.5 cents
California remains home to the highest average retail diesel prices in the nation, the agency said: $2.369 per gallon, down 3 cents from last week.
The average U.S. retail price for gasoline dropped 6.3 cents to $1.759 per gallon this week, according to EIA, which is 43.2 cents per gallon cheaper compared to the same week last year.
The highest price for gasoline remains out on the West Coast – the only region where prices exceed the $2 per gallon mark. Including California, retail gasoline prices on the West Coast averaged $2.312 per gallon, down 6.3 cents from last week. When California’s prices are excluded, the West Coast average drips to $2.012, down 6.1 cents from last week.