Low gasoline inventories and reduced refinery capacity raise U.S. retail gasoline prices in the West
The average regular retail gasoline price in the Rocky Mountain region (PADD 4) was $3.64 per gallon (gal) on August 2, 2021, up $1.27/gal from a year ago and 48 cents/gal higher than the U.S. average price. For each week since July 12, 2021, the Rocky Mountain price has reached record-high differences in nominal gasoline prices compared with the U.S. average, according to our Gasoline and Diesel Fuel Update. Since mid-2018, Rocky Mountain prices have generally been higher than the U.S. average price.
Similarly, retail gasoline price premiums in the West Coast region (PADD 5) compared with the U.S. average increased in about 2018. On August 2, West Coast regular retail gasoline prices were $3.91/gal, 76 cents/gal higher than the U.S. average price (Figure 1).
Although many factors contribute to regional differences in retail gasoline prices, refinery closures in the West Coast and Rocky Mountain regions in the past year may be contributing to low refinery output of gasoline and the resulting low inventories, which contributes to higher prices. In addition, both the Rocky Mountain and West Coast regions have been operating at reduced refinery utilization this summer compared with average summer rates—another factor limiting gasoline production and affecting prices.
Amid reduced refinery capacity and utilization, U.S. gasoline demand (measured as product supplied) this year has mostly returned to historical summer levels, averaging only 3% lower than demand in 2019, based on average U.S. product supplied from the first week in June through the last week in July. We will release PADD-level product supplied data in the Petroleum Supply Monthly (PSM) on August 31, which will indicate whether gasoline demand in the Rocky Mountain region or West Coast region in June has fully returned to 2019 levels. Based on trade press reports, however, demand for gasoline and other petroleum products in the western United States is higher than normal. Some of the higher demand could be the result of increased consumption from trucks or other emergency response vehicles responding to wildfires in the western United States. Other June indicators for gasoline consumption include an increase in mobility, according to trends in Google Mobility, which has shown less time spent at home and increases in visits to other destinations. Another sign of increased driving, particularly in the Rocky Mountain region, is higher numbers of visitors to national parks. According to the National Park Service, visitors to Yellowstone National Park, Zion National Park, and Rocky Mountain National Park from January through June 2021 range from 8% to 26% higher than during the same period in 2019.
Unlike other regions in the United States, the Rocky Mountain region produces almost all of the gasoline it consumes, with little flows to or from other U.S. regions and few imports. The region had 16 refineries until mid-2020, when HollyFrontier announced it was closing its refinery in Cheyenne, Wyoming, which had a capacity of 48,000 barrels per day (b/d), or 7% of the region’s total refining capacity. They are converting the refinery to renewable fuels production, but the immediate termination of traditional petroleum fuels production has contributed to comparatively low gasoline inventories for this time of year. As of July 30, total motor gasoline inventories in the Rocky Mountain region were 6.1 million barrels, 15% lower than the five-year (2016–20) average (Figure 2). On July 16, Rocky Mountain total gasoline inventories were less than 5.8 million barrels, the lowest level for any week since June 7, 2013.
Although it produces nearly all of the gasoline it consumes, the Rocky Mountain region has historically received some motor gasoline from the Midwest and, recently, has started receiving higher volumes. From 2015 to 2019, the Rocky Mountain region received an average of 49,000 b/d of motor gasoline from the Midwest. Since the Cheyenne refinery closed, between September 2020 and May 2021, the Rocky Mountain region received 60,000 b/d of motor gasoline by pipeline from the Midwest region. In May 2021, the region received more than 71,000 b/d, the second-highest amount for any month in EIA data, which dates back to 1986.
The West Coast region also produces most of the gasoline it consumes. During periods of constrained gasoline supply, such as during the Torrance refinery outage in 2015 and several refinery disruptions in 2019, the West Coast region can significantly increase its motor gasoline imports. The closure of the 161,000 b/d Marathon Martinez refinery in California in mid-2020 (also currently being converted to renewable fuels production) may also be affecting gasoline supplies, inventories, and prices. Refinery utilization is also unseasonably low, averaging 87% from the first week in June through the last week in July, compared with an average of 94% over the same period in 2019. In addition to the loss of refining capacity and low utilization, trade press has recently reported some logistical constraints developing in the West Coast region as a result of pipeline testing, which is reducing flows of finished products and affecting customer deliveries. As a result of these constraints, West Coast imports of motor gasoline have increased, reaching a high of 270,000 b/d the week of July 2, the second-highest import volume for any week in EIA data, which dates back to 2004 (Figure 3). Weekly import data show that from the first week in April through July 30, West Coast motor gasoline imports averaged 96,000 b/d. If confirmed in monthly data, this total would represent the third-highest import volume for the April–July period in EIA data, which dates back to 1981.
Aside from the Martinez refinery, Phillips 66 announced plans to stop refining petroleum at its 120,200 b/d Rodeo refinery in California while it transitions to renewable fuels. The refinery had not terminated its petroleum refining operations as of January 1, 2021, (which is reflected in our latest Refinery Capacity Report) and is still actively refining crude oil. The transition of another petroleum refinery to primarily renewable diesel production, however, will likely affect California’s gasoline supply and imports.
In the long term, the West Coast and Rocky Mountain regions could continue to face reduced gasoline supplies as a result of these refinery closures, absent alternative supplies from other U.S. regions or imports. Another uncertainty for both the West Coast and Rocky Mountain regions is how or whether their diesel supplies will be affected from the refinery closures because of their conversion to renewable diesel production. Depending on their level of output, total diesel supplies may be less affected than gasoline or other petroleum products.
U.S. average regular gasoline and diesel prices increase
The U.S. average regular gasoline retail price increased more than 2 cents to $3.16 per gallon on August 2, 98 cents higher than the same time last year. The Rocky Mountain price increased more than 4 cents to $3.64 per gallon, the West Coast price increased more than 3 cents to $3.91 per gallon, the Gulf Coast price increased nearly 3 cents to $2.84 per gallon, and the Midwest and East Coast prices each increased nearly 2 cents to $3.05 per gallon and $3.03 per gallon, respectively.
The U.S. average diesel fuel price increased nearly 3 cents to $3.37 per gallon on August 2, 94 cents higher than a year ago. The West Coast price increased nearly 6 cents to $3.99 per gallon, the East Coast price increased more than 2 cents to $3.33 per gallon, the Midwest price increased 2 cents to $3.28 per gallon, and the Rocky Mountain and Gulf Coast prices each increased nearly 2 cents to $3.67 per gallon and $3.10 per gallon, respectively.
Propane/propylene inventories rise
U.S. propane/propylene stocks increased by 1.5 million barrels last week to 66.0 million barrels as of July 30, 2021, 10.7 million barrels (14.0%) less than the five-year (2016-2020) average inventory levels for this same time of year. East Coast, Midwest, and Rocky Mountain/West Coast inventories increased by 0.8 million barrels, 0.7 million barrels, and 0.3 million barrels, respectively. Gulf Coast inventories decreased by 0.3 million barrels.
