Posted in: Forecasts,
by Patrick DeHaan on Dec 24, 2013 10:03 AM
With 2014 just a New Years Eve celebration away, motorists have been hoping they'll be able to keep a resolution of finding cheap gas in the year ahead, so here are a few things you can expect at the pump in 2014:
1. Wild Price Swings - Volatility in the U.S. gasoline market is here to stay. Very uneven crude oil prices, and equally uneven regional refining should lead to gyrations of 30-75cts gal more for given localities.
(Where we came from in 2013, month by month)
2. Big Spreads Amongst Retailers in the Same Area - Gasoline prices promise to be highly variable even within small geographic communities. There are two movements at work in U.S. retail markets. Several major companies are invested in product differentiation (additives, etc.) as well as loyalty tie-ins with grocers and other merchandisers. Independent retailers tend to stress a competitive price point, in some cases offering fuel near “break-even” levels.
3. U.S. Crude Exports to Foreign Countries - Watch for a strong lobbying effort focused on lifting the de facto ban on exports of U.S. crude. Proponents will argue that the U.S. shale oil boom will be stunted if exports are not allowed; critics will charge that crude represents a natural resource, and believe the U.S. will “export” its pricing advantage should restrictions be eased. (Note: U.S. exports to Canada are allowed)
4. Shallow Inventories - U.S. inventories of gasoline and diesel are still very much “just in time” stocks with much less product per person in storage than existed 25-30 years ago. Refining capability has surged, but markets tied to a few local refineries are still capable of spiking higher when refineries see events.
5. Florida and other South Atlantic Coast Supply Points Could Face Serious Supply Issues - Delivery of petroleum between waterborne ports relies on U.S. flagged vessels, in accordance with the Jones Act. Because many more vessels are now required to move crude from port to port at the Gulf Coast, the freight rates for moving gasoline and diesel have skyrocketed. Costs for pipeline distribution points are at fractions of waterborne freight rates.
6. Less Imports of Finished Gasoline and More Exports - Exports of gasoline are likely to rise, with the U.S. the most vital source of supply for Central and South America as well as some West African, and even Asian countries. Imports of gasoline should dip to 21st century lows.
7. Midwest Refinery Upgrades Finished - The last two years have seen major refinery upgrades in the Midwest, and many of those states could see motor fuel prices spend plenty of time below $3 gal in 2014.
8. Cheap Ethanol Keeps Gasoline Prices at Bay - Ethanol prices are likely to be significantly lower than gasoline costs in 2014, thanks to bountiful grain harvests. With most of the country using E10 (10% ethanol/90% hydrocarbon) motor fuel, the cheaper ethanol values will put some further downward pressure on gas prices.
9. Diesel Prices Remain Strong - Wholesale and retail prices for diesel fuel should remain some 30-50cts gal higher than gasoline prices in most of the country. Diesel is a much more profitable product among refiners.
10. The Tax Man Cometh - The federal motor fuel tax has not seen an increase since October 1993, and an election year does not present a hospitable environment for a higher levy. We will see a number of states and local governments raise fuel taxes, and a more heated debate on the federal excise tax will loom in 2015.