Analysis by Dr. Nancy Yamaguchi
Gasoline and diesel at the pump began 2016 as a great bargain, but they ended at levels well above the start of the year. The figure following shows the change in US retail gasoline prices at the end of 2016, relative to the end of 2015. In all PADDs outside of PADD 5 (the West Coast,) prices soared above last year’s prices. On a national level, gasoline prices jumped 27.5 cents/gallon above where they were a year ago. Prices in PADD 1, the East Coast, were 29.8 cents/gallon higher. The Midwest PADD 2 market experienced the largest price hike at 40.7 cents/gallon. PADD 3 Gulf Coast prices rose 32 cents/gallon. PADD 4 prices rose 20.3 cents/gallon. In the PADD 5 West Coast market, gasoline prices were 3.8 cents/gallon lower. This was a not caused by a price drop in PADD 5, however, but was instead a reflection of the relative isolation of the PADD 5 market. At the end of 2015, PADD 5 gasoline prices had surged 62.9 cents per gallon above the U.S. average. PADD 5 prices still remain the highest in the country, but at the end of 2016, the PADD 5 price premium had shrunk to only 28.3 cents per gallon above the U.S. average price.
Over the course of 2016, the average gasoline price at the pump rose 27.5 cents. When crude prices fell, product prices followed. At the end of 2013, gasoline retail prices averaged $3.33/gallon. They fell to $2.30/gallon at the end of 2014, and they declined further to $2.03/gallon at the end of 2015. Motorists became accustomed to seeing gasoline prices below $2/gallon at many retail outlets, especially in the U.S. Gulf Coast market. By the end of 2016, U.S. retail gasoline prices had climbed back to $2.30/gallon, and sub-$2.00 gasoline now appears to be a thing of the past once again.
At the national level, diesel retail prices surged 30.5 cents/gallon higher at the end of 2016 relative to prices at the end of 2015. Prices rose the most in PADD 5 (34 cents/gallon higher) and PADD 2 (32.6 cents/gallon higher.) In the East Coast PADD 1, the Gulf Coast PADD 3, and the Rocky Mountains PADD 4, diesel prices at the end of 2016 had risen by approximately 29 cents/gallon relative to the end of 2015.
U.S. diesel prices were $3.90/gallon at the end of 2013. They collapsed to $3.21/gallon at the end of 2014 and $2.24/gallon at the end of 2015. Oil prices have now strengthened, and diesel prices rose to an average of $2.54/gallon at the end of 2016.