Why Events Overseas Matter to Gasoline Retailers and Consumers

1
Why Events Overseas Matter to Gasoline Retailers
and Consumers
2
WTI and Retail Gasoline Prices Generally Move In
Unison
3
What Comprises theGasoline Price?
Regional
Spot Gasoline Price
Global
4
Main Reasons BehindGasoline Price Spikes

• High Crude Oil Prices, and/or
• Regional Gasoline Infrastructure Problems, and/or
• High Demand with Low Inventories

5
Analysis of 3 Recent Gasoline Price Spikes

• Midwest Price Spike of 2001
• March 2003 Price Spike
• August 2003 Price Spike

6
Analysis of 3 Recent Gasoline Price Spikes

• Midwest Price Spike of 2001
• March 2003 Price Spike
• August 2003 Price Spike

7
Low Total OECD Oil Stocks Keep Market Balance
Tight
Total includes commercial and government stocks.
Source Energy Information Administration, April
2001.
8
OPEC 10 Production Cutin First Half of 2001
Source Energy Information Administration.
9
Quarterly World Oil Demand Growth from Previous
Year
Source Energy Information Administration.
10
Overview of Market Fundamentals

• Tight balance in global petroleum market
• Tight balance means low inventories
• Low inventories mean upward price pressure and
  potential for increased volatility
• Exacerbating regional volatility factors
• Refinery system runs near maximum during summer
• U.S. distribution system showing signs of strain
  -- local ramifications
• Increasing distinct types of gasoline
• All of the above contributing to prices this year

11
Midwest RFG Prices RiseDue to Tight Supplies
2000
2001
Source Reuters database.
12
Product Moves By Pipeline Barge From Refining
Centers
Imports
13
Dependence on Distant Supply Can Increase
Response Time
Source Energy Information Administration.
14
Analysis of 3 Recent Gasoline Price Spikes

• Midwest Price Spike of 2001
• March 2003 Price Spike
• August 2003 Price Spike

15
Early 2003 Gasoline Price Rise Due to Crude Oil
Price Increase
Source Energy Information Administration.
16
OPEC 10 Production Much Lower in December and
January
Sources History EIA Projections Short-Term
Energy Outlook (STEO).
17
Crude Oil Production forVenezuela and Saudi
Arabia
Sources History EIA Projections Short-Term
Energy Outlook (STEO).
18
OECD Commercial Oil Stocks Remain Below Average
in 2003
Source International Energy Agency database,
January 2003 and EIAs Short-Term Energy Outlook,
March 2003.
19
U.S. Crude Oil Inventories
2003
Sources History EIA Projections Short-Term
Energy Outlook, March 2003.
20
U.S. Total Gasoline Inventories
2003
Sources History EIA Projections Short-Term
Energy Outlook, March 2003.
21
Analysis of 3 Recent Gasoline Price Spikes

• Midwest Price Spike of 2001
• March 2003 Price Spike
• August 2003 Price Spike

22
Crude Oil Not a Reason for Gas Price Increase in
Aug. 2003
Source Energy Information Administration.
23
Reasons Behind August 2003 Gasoline Price Increase

• Tight Market
• Record Gasoline Demand
• Low Gasoline Inventories
• Refinery Outages
• Due to Power Blackout in Midwest
• California
• East Coast
• Kinder-Morgan Pipeline Rupture in Arizona

24
Gasoline Refinery ProductionAcross Three Regions
Midwest
West Coast
East Coast
Source Energy Information Administration.
25
Gasoline Demand ReachedRecord Levels in August
2003
Source Energy Information Administration.
26
U.S. Gasoline InventoriesFell Below Normal in
August
Monthly
Weekly
Source Energy Information Administration.
27
Regular Gasoline Spot Prices
Source Reuters database.
28
Gasoline Price Rise Varied Among Locations
Numbers represent the difference, in cents per
gallon, of the average price for retail regular
gasoline between Aug. 29, 2003 and Aug. 1, 2003.
Source American Automobile Association
29
Important Web Sites

• From EIA
• Gasoline and Diesel Fuel Update (Prices)
• This Week In Petroleum
• Weekly Petroleum Status Report
• A Primer on Gasoline Prices (an EIA Gasoline
  Brochure)
• AAA Prices by State and Locality
• (http//www.aaanewsroom.net/Main.asp)