This week FUELSNews headlines consisted of continued Russia aggression spurring a 3-week high, Biden approving more acreage for drilling, a look at retail fuel prices, and five insights that describe fuel markets. This week consumers learned that the International Energy Agency (IEA) warned that there could be around a 3 MMbpd loss of Russian oil from May through the end of the summer – though Saudi Arabia and other OPEC members have protested that number as misleadingly high. As Russian oil output continued to slide, the oil and gas market stayed bullish this week. Additional supply is limited, but US producers are slowly beginning to help balance out the embargoed Russian supply. Higher prices continue to hit consumers as they fill up their vehicles. Some companies, such as Uber, are even charging a temporary fuel surcharge to help their drivers manage the situation.
Biden announced drilling permits on 144,000 acres of federal land this week. So, will drilling on federal lands help drive prices down? Yes and no. After Biden announced pausing new drilling on federal lands in 2021, a federal court struck down the order, allowing drilling to continue. In fact, oil permits in public lands in 2021 were 34% higher than in the first year of the Trump presidency. So, in the short-term, companies who wanted a permit could get it. But permits slowed in 2022 as oil and gas companies shifted focus elsewhere, seeing the opposition from the administration. Although the permit release won’t immediately cause a surge of production, it provides a strong signal to oil companies that the administration is backing down from its previous threats. That message, far more than the permits themselves, could give producers the confidence they need to invest in ramping up their production.
Typically, when wholesale prices fall, retail prices are slow to follow. This phenomenon, sometimes called “sticky pump”, causes rack-to-retail spreads to expand – increasing the value of buying fuel in bulk while making fleet card purchases more expensive. With so much attention on gas prices right now, though, it seems retail stations are being careful to track the market. So why do prices feel like they’re so stubbornly high? Supply is limited, and last week’s crude stock inventory fell by 8 million barrels (according to the Energy Information Administration). With inventory levels continuing to drop and not enough product being pumped out to meet the freshly arrived summer demand window, it’s no surprise that prices are still above $3/gal at the wholesale level and $4 at the retail level.
Lastly, with all of the shakeup in the energy market, it can be hard to separate real underlying market conditions from punditry. Today’s analysis looks at five key petroleum insights you should know to stay up to date on what’s happening in the market and separate fact from fiction. Click Here to download Mansfield’s petroleum fact sheet.
Prices in Review
WTI Crude opened the week at $107.03. Prices briefly spiked Tuesday before retreating through Thursday. Crude was again up this morning, opening at $104.07, a decrease of $2.96 from Monday.
Diesel opened the week at $3.8570. Diesel spiked earlier in the week before falling back down, and on Wednesday diesel gained again before retreating Thursday and Friday, showing much volatility this week.
Gasoline opened the week at $3.3922. Prices fell through Wednesday, before gaining again in the latter half of the week. Gasoline opened today at $3.3270, a decrease of $0.0652 from Monday’s opening price.