U.S. gasoline prices have been rising since reaching a multiyear low of $1.77 per gallon in late April 2020 because of higher crude oil prices and higher wholesale gasoline margins, according to the U.S. Energy Information Administration (EIA). Meanwhile, China refined more crude oil than the United States for the first time in April 2020.
The EIA’s Gasoline and Diesel Fuel Update shows U.S. regular retail gasoline prices were an average of $2.85 per gallon as of Monday (March 29). Before the small decline this week, the gasoline prices increased for 17 consecutive weeks, the longest streak of price increases since 1994.
Gasoline prices in the United States are affected by crude oil prices, refining costs, retail distribution and marketing costs, and taxes. The price changes are typically a result of changes in crude oil prices and refining costs because gasoline taxes and retail distribution costs have been stable.
International benchmark Brent crude oil prices rose to an average of $67 per barrel in March, from $43 per barrel in November. The price of petroleum products changes by 2.4 cents per gallon when the price of crude oil changes by a dollar per barrel with all else remaining equal. Each barrel contains 42 gallons.
Refining margins have been rising also. The margins are the difference between refiners’ acquisition cost of crude oil and wholesale gasoline prices. U.S. average wholesale gasoline margins rose to 33 cents per gallon in February, from 18 cents per gallon in November.
Though refining margins are up, refineries in China processed more crude oil than U.S. refiners for the first month on record in April 2020, according to the EIA. The trend continued throughout 2020, except for July and August. China processed more crude oil than the United States because of restrictions related to the COVID-19 pandemic in 2020 and because of differences in the longer-term structural refining trends between the two countries.
Crude oil processing in China also exceeded U.S. gross inputs in May and October 2020. Gross inputs into distillation units include non-crude liquids such as lease condensate and unfinished oils. As a result, gross inputs are about 0.5 million barrels per day larger than net crude oil inputs.
The pandemic contributed to lower demand for petroleum products such as gasoline, distillate and jet fuel. Net inputs of crude oil to U.S. refiners fell in April while crude oil processing in China started to rise above previous levels following a demand increase when COVID cases declined in that country.
Refinery runs in China also started to rise in April 2020 because the country implemented a policy in 2016 that encourages refiners to refine more petroleum products by fixing product prices at $40 when the Brent crude oil price falls to less than $40 per barrel. The Brent crude oil price fell and remained less than $40 per barrel between March and May 2020.
China processed a record 14.1 million barrels per day of crude oil in June and 14.5 million barrels per day in November. U.S. refinery runs have yet to return to March 2020 levels because of demand reductions and hurricanes in the fall that disrupted refinery processes. Some refineries came back online in late 2020, but refinery runs remained lower than historical averages in 2020.