Liquid Fuel Report: Gas Prices Rise for the First Time in 7 Weeks

Oil refineries

The Energy Information Administration recently released its latest weekly reports on the status of various liquid fuels in the United States, covering the week that ended October 18. The reports touch on natural gas and petroleum, presenting data about the production, storage, and prices of the fuels.

Changes in the data can reflect natural variations, seasonal trends, long-term market effects, and current events in regions of the globe where liquid fuels are produced, processed, and sold. The most recent reports were highlighted by the end of the partial government shutdown, which occurred during the time period that the statistics cover.

Working natural gas in storage — the volume readily available to the market — increased by 87 billion cubic feet in the week ended October 18 to 3,471 Bcf, according to EIA estimates. This is down by 92 Bcf from the same period last year but still slightly above the five-year historical average.

As of Thursday, futures traded at $3.619/mmBTU, below the $4-to-$6 range within which producers can both earn a profit and compete with alternative fuels like coal.

The data show a trend has developed over the past few years. Inventories have been on the rise as domestic production increases, largely thanks to advances in horizontal drilling and hydraulic fracturing technology. These advances have contributed to a revolution in energy production in the U.S., and producers are rapidly helping make the dream of energy independence come true.

Domestic production supplied the U.S. with 84 percent of its total energy needs in 2012, the highest level since 1991. The EIA estimates that the U.S. could become a net exporter of natural gas as early as 2020, assuming regulatory hurdles can be overcome.

chart (13)

U.S. crude oil refinery inputs averaged about 14.9 million barrels per day during the week ended October 18, with refineries operating at 85.9 percent capacity. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.2 million barrels from the previous week. At 379.8 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year.

WTI, a grade of crude oil used as a benchmark in oil pricing, was $100.87 per barrel, $1.30 less than last week’s price but $10.87 more than a year ago. Many had predicted that the price of oil might have continued to sink as demand was depressed over concerns about the performance of the U.S. government. Now that the government is back in order, it is yet to be seen what direction the price of oil will take in the rest of the fourth quarter.

However, trends such as increasing stability in the Middle East and improvements in the domestic production of oil should serve as drivers to keep prices from climbing too high in the short term.

chart (12)

As the EIA put it, “All else equal, changes in gasoline prices follow changes in crude prices.”

On Monday, the average retail price of a gallon of gasoline in the U.S. was $3.360. This is down more than 32 cents from the year-ago period, though up a fraction from the previous week, in the first increase seen in the last seven weeks. It is also down from the summer-to-date peak of $3.68, which was hit on July 22.

Earlier in August, the EIA projected that oil and gas prices would decline throughout 2014, with regular gasoline approaching $3 per gallon by the end of the year. Thanks to increased production in the U.S. and other non-OPEC countries, prices could very well still continue to decline as the dust settles over the government shutdown.

Don’t Miss: Here’s Why Workers Weren’t Scared to Quit in August.