Gasoline Most Expensive Over Oil as Refinery Profit Increasesby
Retail gas averages $1.13 per gallon more than Brent in 2015
Brent has dropped 23% this year, pump price has slipped 5%
Gasoline at the pump hasn’t been so expensive against its raw material, crude oil, since at least 2004.
Regular gasoline in the U.S. has averaged $1.13 a gallon more than Brent crude, the global benchmark, so far in 2015, according to data compiled by Bloomberg based on AAA prices and Brent futures. That’s almost 20 cents a gallon higher than the average in the past 10 years.
Brent crude has slumped 23 percent this year after falling 48 percent in 2014 on concern a global glut will persist as the Organization of Petroleum Exporting Countries pumps above its collective target and U.S. production stays near a three-decade high. Retail gasoline has declined less than 5 percent in 2015. The price difference has helped boost earnings of refineries including Tesoro Corp and Valero Energy Corp.
Gasoline demand in the U.S. averaged 9.24 million barrels a day in the four weeks ended Nov. 13, the highest seasonal level since 2007, according to the EIA. That’s up from 9.06 million a year earlier. For all of 2015, demand is up more than 300,000 barrels a day.
"We are seeing very good demand on gasoline, and retail gasoline service station operators are making a lot of money," said Andy Lipow, president of Lipow Oil Associates LLC, an energy consulting firm in Houston. "Gasoline demand next year is going to be up 1 percent comparing with 2015, so refinery margins for gasoline are going to be good."
Global crude output remains strong. The Organization of Petroleum Exporting Countries produced 32.2 million barrels a day in October, surpassing its target of 30 million since June of 2014, according to data compiled by Bloomberg. In the U.S., output stays near a three-decade high.
Brent crude futures gained 57 cents to $44.14 a barrel Wednesday on the London-based ICE Futures Europe exchange, down 44 percent in the past year. West Texas Intermediate crude, the U.S. benchmark, rose 8 cents to $40.75 on the New York Mercantile Exchange after dipping below $40 intraday.
Brent is more important than WTI for determining gasoline prices in the U.S., the Energy Information Administration has said.
Regular gasoline averaged $2.13 a gallon nationwide Tuesday, the lowest level since February, according to Florida-based AAA, the nation’s biggest motoring group. That puts the current premium of gasoline to Brent at $1.08 a gallon.
"Oil is oversupplied, and gasoline has been relatively tight," said Robert Campbell, head of oil-products research at Energy Aspects Ltd. "You make gasoline from crude, but they are two different markets. We are having really strong gasoline demand because of the low price."