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Fuel Marketer Intelligence: Supply Chain Dynamics to Retail Fuel Prices

The US average retail price for regular grade gasoline slipped to the second lowest weekly price in 2015 in closing out November, and is poised to dive below the $2 gallon psychological threshold for the end-year holiday season, as growing inventory weighs on values.

At $2.059 gallon on Nov. 30, the national average price for all formulations of regular grade gasoline is just 1.5cts above the current 2015 low plumbed on Jan. 26 at $2.044 gallon, per data from the Energy Information Administration. A break below the $2 gallon divide last occurred in March 2009 during the Great Recession, although this year’s decline is the result of a global glut in oil supply, not waning demand amid rising unemployment.

In contrast, gasoline demand has surged in 2015, and the Department of Labor reported the national unemployment rate for October at 5%, the lowest it’s been since April 2008, with the market expecting the jobless rate to have held at the 5% mark in November.

Based on preliminary data, gasoline consumption is on par with 2008 when demand averaged 9.15 million bpd, with record demand set in 2007 at 9.359 million bpd. Through Nov. 20, EIA shows implied gasoline demand—gasoline supplied to the primary market—at 9.141 million bpd in 2015, 321,000 bpd or 3.6% above the comparable year-ago period.

The growth in US gasoline demand is driven by low retail prices and an improving economy highlighted by healthy employment. These features have also driven vehicle sales in the United States, which were 5.1% higher than in 2014 during the first three quarters of the year, according to Bank of America Merrill Lynch.

WardsAuto reported light vehicle sales in the United States reached a seasonally adjusted annual rate of 18.4 million in November, the third consecutive month with SAAR vehicle sales above 18 million.

In a recent note on the Automotive Industry, analysts with Bank of America Merrill Ly...