U.S. gasoline prices are down from 2022 prices heading into Memorial Day weekend (5/24/2023)
The American Automobile Association (AAA) expects 6% more Memorial Day weekend road trips in 2023 than in 2022 as the average U.S. retail price for regular gasoline has decreased by more than $1 per gallon (gal) year over year. In 2022, gasoline prices over the Memorial Day weekend were at their highest since 2012 because of high crude oil prices arising from the effects of Russia’s full-scale invasion of Ukraine, and low gasoline inventories. Retail gasoline prices have come down from 2022 because of lower crude oil prices, but they remain slightly above prices in 2019 and 2021 because gasoline inventories remain low and crack spreads (the difference between petroleum product prices and crude oil prices) remain elevated.
Heading into Memorial Day weekend 2023, the U.S. retail gasoline price averaged $3.53/gal, or $1.24/gal (26%) lower than the inflation-adjusted price one year ago (Figure 1). Despite this price decrease, retail gasoline prices remain relatively high. This year’s price is higher than the inflation-adjusted prices of $3.38/gal in 2019, $2.22/gal in 2020 (when responses to the COVID-19 pandemic decreased demand for petroleum products), and $3.41/gal in 2021.
Retail gasoline prices have come down from last year mostly because of lower crude oil prices. Crude oil is the largest component of the retail price of gasoline, making up more than half of the final price. As of May 23, the spot price for Brent crude oil has averaged $76 per barrel (b) for the month, a decrease of $41/b (35%) from the inflation-adjusted average in May 2022 (Figure 2).
Crude oil prices have fallen from their 2022 highs because of increasing global production and weakening global economic conditions. Global production of crude oil has been near record highs since the third quarter of 2022 (Q322), averaging 101 million barrels per day (b/d). Increased production has alleviated tightness in global crude oil markets, supporting inventory builds in each of the past three quarters (Q322 through Q123). As global crude oil production has increased inventories, weakening economic conditions have also lowered crude oil prices. Persistently high rates of inflation, rising interest rates, and perceived risk around the global banking sector have weakened demand outlooks and lowered prices. In addition, surveys show that manufacturing activity in China, the world’s largest manufacturer, contracted in April, likely indicating a slowdown in the global economy.
These factors have brought the Brent crude oil price to below the inflation-adjusted prices of May 2019 and 2021. The price of Brent crude oil is down $8/b (9%) from the May 2019 price and down $1/b (1%) from the May 2021 price.
Despite a lower inflation-adjusted crude oil price than in 2019 and 2021, the average retail gasoline price in May 2023 is higher than in those years because of high gasoline crack spreads (Figure 3). The RBOB-Brent crack spread reflects the price difference between wholesale prices for the petroleum component of gasoline used in many parts of the country and the price of Brent crude oil. In May 2023, the RBOB-Brent crack spread averaged 74 cents/gal, or 45 cents/gal (38%) lower than in May 2022. At the same time, that is 42 cents/gal (134%) higher than in May 2019 and 24 cents/gal (48%) higher than in May 2021.
The RBOB-Brent crack spread has been relatively high to incentivize low gasoline inventories to grow. Gasoline inventories have been at or below five-year (2018–2022) lows in 2023 and are 10% below their May five-year average as of the May 24 Weekly Petroleum Status Report. Gasoline inventories have decreased in 2023 partially because of rising consumption, which has been at its highest levels since the pandemic began. In addition, refinery utilization dropped because of severe cold weather that swept through the midcontinent in late December. Utilization rates remained subdued in early 2023 due to postponed refinery maintenance that was originally scheduled for spring and fall of 2022.
Despite the low inventories, retail gasoline prices have fallen significantly since Memorial Day weekend 2022 because of lower crude oil prices and crack spreads compared with last year. As a result of lower retail gasoline prices and more travel following the pandemic, AAA expects the most Memorial Day weekend road trips this year since 2019. AAA forecasts 37.1 million road trips this Memorial Day weekend, an increase of 6.0%, or 2.1 million, from 2022, though down 1.4%, or 0.5 million, from 2019.
U.S. gasoline prices vary regionally, reflecting local supply and demand conditions, different fuel specifications required by state laws, and taxes. Retail gasoline prices are usually the highest on the West Coast because of the region’s limited connections with other major refining centers, tight local supply and demand conditions, requirements for gasoline specifications that are more costly to manufacture, and higher taxes. Regional gasoline prices are usually the lowest on the Gulf Coast, which holds about half of U.S. refining capacity and produces more gasoline than it consumes. It is also where states generally have lower gasoline taxes than the national average. Heading into Memorial Day weekend 2023, retail gasoline prices averaged $4.51/gal on the West Coast and $3.04/gal on the Gulf Coast (Figure 4). Prices averaged $3.38/gal on the East Coast, $3.47/gal in the Midwest, and $3.58/gal in the Rocky Mountains.
Upcoming changes to Weekly Petroleum Status Report (WPSR)
EIA's Weekly Petroleum Status Report (WPSR) will begin showing Fuel Ethanol and Total Motor Gasoline (sum of Finished Motor Gasoline and Motor Gasoline Blending Components) estimates separate from Other Oils exports estimates starting on June 1, 2023. This Week in Petroleum will reflect changes from WPSR in gasoline export data series. Please see full notice for more information.