May Commentary
May broke the torpor that characterized April wholesale prices. In fact, May 2009 produced some of the largest percentage increases on record, if not some of the largest outright price increases for a single month. And unlike February and March, the volatility didn’t lead to 5cts gal and 10cts gal moves in disparate directions. It was a bull market month in particular for crude oil and gasoline, but even the demand-ravaged diesel market saw some upticks.
By month’s end, consumers were paying about $881-million per day for gasoline, up by more than $100-million/day from April, but still well shy of the nearly $1.5-billion paid most days in May 2008. The increases weren’t demand driven – it was a simple case of retail prices moving up by more than 25cts gal from the previous month. Almost all of the country saw price increases of at least 25cts gal - - the simple but notable exception was the West Coast where prices advanced by only 19.9cts gal. Ironically, the region that saw the greatest downdrafts in midwinter (the Great Lakes) was the recipient of the sharpest increases in May, with prices in states such as Illinois, Indiana, and Michigan rising by 34cts gal or more. This trend continued and actually accelerated as May gave way to June.
From the longer term perspective, prices moved back above where they were five years ago with most parts of the country up by about 10-15% from May 2004.
There was nothing funky happening at service stations, however. By the end of May, wholesale prices in many parts of the country were 125% to 175% above where they bottomed in late December.
Diesel prices didn’t match the updrafts for gasoline as statistics continued to suggest that diesel demand was down by double digits from a year ago. There were clearly no “green shoots” in the demand sector, thanks to lower heavy truck traffic and no signs of any recovery in housing and small industry where diesel sales are miserable. Retail prices still were able to rise by 7.2cts gal from May, but measured against the huge upswing, that rendered the diesel cut of the petroleum barrel a loser for many domestic refiners. Wholesale prices advanced by about 18cts gal and that put them more than $2.20 gal below where they were in May 2008. Retail prices moved up by only about 8cts gal so any of the robust margins for truckstops vanished during the month.
Jet fuel prices were similarly quite cheap when compared to year ago numbers, but slightly more expensive than April 2009 quotes. The OPIS compilation of jet fuel prices in the major bulk markets yielded an average number of $1.515 gal for the month, versus up 12.4cts gal from April. However, it should be noted that May ended with wholesale prices considerably higher than they’ve been since the dead of winter.
From a yearly perspective, May 2009 jet fuel numbers averaged about $2.25 gal less than they did in May 2008. |
