U.S. retail gasoline prices hit new record, as refiners struggle to meet demand

Washington, May 10 / BNA / Retail prices of gasoline in the United States rose, on Tuesday, and set another record on record, surpassing the record set in March, while global refineries struggled with the bottleneck that led to a price hike before the driving season.


The average retail gallon of gasoline cost $4,374 early Tuesday, according to the American Automobile Association, beating the previous record of $4,331, Reuters reports.


Since March 30, Brent crude futures have lost 7%, but gasoline futures are up 9.4%, setting a record on Friday at $3.7590 a gallon before selling on Monday.


Refinery shutdowns due to scheduled maintenance and unplanned disruptions have raised fuel prices even as the United States and other countries take steps to boost crude supplies worldwide. Global fuel stocks are dwindling as demand recovers to pre-pandemic levels. Supplies were tightened further in the wake of the invasion of Ukraine and subsequent sanctions on Russia from the United States and its allies.


The world has lost 1 million barrels of refining capacity and 1.5 million barrels of oil supplies since the pandemic, Mike Jennings, CEO of HF Sinclair Corp., estimated in an earnings call on Monday.


“That’s 2.5% of global consumption…it’s a big number,” Jennings said.


In the spring, refineries prioritize gasoline production before the warmer weather when driving. But in recent weeks they have ramped up production of distillates to meet demand for jet fuel and diesel in Europe, Latin America and the United States, as Western sanctions on Moscow slash Russian exports.

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“In the refinery earnings calls, they talk about making sure it runs at full power — refinery utilization will remain very high throughout the year,” said Gary Cunningham, director of market research at Tradition Energy.


Diesel fuel hit a record $5.45 per gallon at the pump this week.


However, fuel prices in the US are still significantly lower than those of other major consumers such as the UK, Japan and France, where higher taxes drive up the cost of fuel.


“I don’t see that resolving itself until 2023 at the earliest, when more refining capacity is put into play in the Middle East and Asia,” said Patrick DeHaan, head of petroleum analysis at GasBuddy.


The price of US crude oil, the largest input cost to refineries, has fallen by about $20 from its highs in March, as supplies were boosted by the release of millions of barrels of crude from US strategic reserves and demand plummeted due to the coronavirus shutdown in China.


However, product stocks are still declining. Gasoline stocks in the United States fell 3% year-on-year to 228.6 million barrels, according to the US Energy Information Administration.


The 3-2-1 crack spread, a proxy for refining margins, reached $54.34 on Monday, nearly 150% higher than it was at this time last year.


“I think we can expect, assuming economies remain reasonably strong, that commodity prices, particularly our product prices, will be relatively high,” Jennings said.

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