Retail prices for gasoline and diesel have increased significantly following the start of Russia’s further invasion of Ukraine on February 24.
The average U.S. regular retail gasoline price increased 22 percent from $3.53 per gallon on February 21 to $4.32 per gallon on March 14. During the same three-week period, the average U.S. on-highway retail diesel fuel price increased 29 percent from $4.06/gal to $5.25/gal.
“Retail gasoline and diesel fuel prices have never increased at a rate this fast over a three-week period in the history of our data,” EIA said and added that its data for gasoline and diesel goes back to August 1990 and March 1994 respectively.
To compare prices across time periods, a price index such as the Consumer Price Index (CPI) produced by the U.S. Bureau of Labor Statistics is a common tool for adjusting the nominal price level to account for inflation.
The average U.S. regular retail gasoline price for the first two weeks of March 2022 was $4.21/gal. After adjusting historical prices using the CPI, this price in real terms is lower than the all-time high of $5.27/gal in June 2008. The real price adjusts the nominal June 2008 price of $4.05/gal for 14 years of inflation using March 2022 dollars.
Before the most recent increase, both nominal and real gasoline prices were already at their highest levels in years. After beginning 2021 at $2.25/gal, the average U.S. regular-grade retail gasoline price increased to $3.53/gal on February 21, 2022.
Gasoline prices have increased because gasoline inventories have been below their five-year average due to low production and increasing demand. Gasoline consumption increased 9 percent between 2020 and 2021 due to rising employment and increased willingness to travel amid declining Covid-19 cases and higher vaccination rates.
Since Russia’s further invasion of Ukraine began on February 24, increases in retail gasoline prices are mostly due to increasing crude oil prices. Crude oil trades on a global market, and crude oil prices make up 56 percent of the total cost of gasoline as of January 2022.
From February 28 to March 7, the average U.S. regular retail gasoline price increased by 14 percent, making it one of just three week-over-week price increases of more than 10 percent in EIA data history going back to August 1990.
The other two were an 18 percent hike following Hurricane Katrina and a 12 percent rise after Hurricane Harvey.
Looking at price changes over a three-week period, the 22 percent increase from February 21 to March 14 is the largest on record. In California, the average retail gasoline price reached $5.59/gal on March 14. In real terms, this marks the highest price for California since October 2012.
Retail diesel prices have increased even more than retail gasoline. In the week from February 28 to March 7, the average U.S. on-highway retail diesel fuel price increased 18 percent as supply risks for both crude oil and distillate markets increased.
With distillate stocks in the United States already 17 percent lower than their five-year average as of March 11, the possibility of further stock draws has added upward pressure to U.S. distillate and diesel prices. In percentage terms, the previous highest week-over-week diesel fuel price increase was 12 percent on October 3, 2005, according to data going back to 1994.
Even before Russia’s further invasion of Ukraine, retail diesel prices were already elevated because of low inventories and high demand for distillate fuel, which includes diesel fuel and heating oil. From January 4, 2021, to March 14, 2022, the average U.S. on-highway retail diesel fuel price increased from $2.64/gal to $5.25/gal.
Average U.S. on-highway retail diesel prices surpassed $3.00/gal in March 2021 and $3.50/gal in October 2021. On February 14, 2022, retail diesel prices surpassed $4.00/gal.
In California, retail on-highway diesel fuel prices surpassed $5.00/gal on February 21 before increasing to $5.76/gal on March 7, and $6.26/gal on March 14. Retail on-highway diesel fuel prices are averaging more than $5.00/gal in all regions except the Rocky Mountain region, where retail diesel prices averaged $4.97/gal on March 14.
As of March 14, the Brent crude oil price was 16 percent lower than its recent high on March 8. If oil prices remain at these lower levels, this should lead to lower gasoline and diesel prices.
Source: rigzone
