However, in recent years, injections of natural gas into storage have often continued into the first half of November. Levels of natural gas in storage typically decrease from November through March, when demand for natural gas for heating is generally high.
Some large-volume fuel consumers such as power plants and iron, steel, and paper mills can switch between natural gas, coal, and petroleum, depending on the cost of each fuel. When the costs of the other fuels fall, demand for natural gas may decrease, which may reduce natural gas prices. When the prices of competing fuels rise relative to the price of natural gas, switching from those fuels to natural gas may increase natural gas demand and prices. However, the capability of the U. Favorable natural gas prices in recent years have contributed to increased natural gas use by the electric power sector.
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The Bottom Line. Key Takeaways The law of supply and demand regulates gasoline prices, as it does nearly all commodities. Both supply and demand are changing all the time, as new oil wells are discovered and as economic conditions impact consumer demand. As a longer-term general trend, the supply of high-quality oil is fixed and dwindling while global demand is increasing with a rising population and economic growth.
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The result is higher margins when crude oil prices fall, as the gap between acquisition and sales prices widens. Likewise, as crude oil prices increase, fuel retailers often are slower to raise selling prices. This dynamic is generally driven by local competition: if a retail price increase is not matched locally, customers will go to competing gas stations. As a result, fuel retailers often post lower margins when oil prices rise.
With the small decrease in crude oil prices reported in January , retail margins increased as costs fell.
Over the month, the PPI for automotive fuels and lubricants retailing increased 2. The crude oil price decrease extended into February, driving fuel retailer input costs further downward. As a result, the margins for automotive fuel and lubricant retailers increased an additional 2.
Several European countries and some areas in the United States imposed mandatory lockdowns, substantially decreasing demand for crude oil. The large demand drop allowed automotive fuel and lubricant retailers to expand margins, which increased In April, widespread stay-at-home orders and business closures in the United States continued to drive down refined fuel demand and crude oil prices. Fuel retailers took advantage of input price decreases by further expanding margins.
In April, the PPI for automotive fuels and lubricants retailing increased an additional By May, several countries had started to reopen their economies, increasing global demand for fuel. The resulting crude oil price increase raised the cost of fuel for U. The retailers increased selling prices to compensate for the rising cost, but they did so slowly because of the higher-than-average margins received over the previous few months.
As summer began, fuel retailers continued to report lower margins amid a continued recovery in oil prices. The PPI for automotive fuels and lubricants retailing declined 9. See table 3. To calculate the CPI for gasoline, BLS samples gasoline prices in 75 metropolitan areas across the country, collecting about 3, prices each month. At all gas stations sampled, BLS collects prices for regular, midgrade, and premium gasoline, publishing price indexes for each category.
In addition, BLS publishes a gasoline all types price index, which is based on prices for all three grades, and a price index for other motor fuels, which includes sampled prices for diesel and alternative motor fuels. The average prices captured by the consumer price indexes reflect what consumers pay at the pump per gallon, including all sales and excise taxes.
Besides taking into account the specific grade or octane level of the fuel purchased, gasoline prices in the CPI reflect specific levels of service full service or self-service and brand name. Normally, BLS economic assistants collect gasoline prices in person across the country. Since March 16, , when COVID concerns prompted the suspension of in-person data collection, BLS has transitioned to alternative methods for collecting all gasoline price data.
After encountering problems during initial attempts at collection by telephone, economic assistants shifted to collecting data from websites, supplementing them with a third-party source. However, the outlets and specific prices in the sample remained unchanged; only the method of collection varied. For gasoline, as with most CPI items, BLS collects any given price during one of three specified pricing periods within a calendar month: roughly the first 10 days, the second 10 days, and the final 10 days of the month.
Because the process involves collecting a similar number of prices during each period, the gasoline index represents an average of prices over the course of the month.
These data include average prices for gasoline all types , the three individual grades of gasoline, and diesel fuel. See figure 3. The gasoline price index tells a story similar to that of average price values. See table 4. On a seasonally adjusted basis, the gasoline price index fell The index rose in June, July, and August, but remained The index decline is larger than the average price decline because, for seasonal reasons, gasoline prices are generally higher in December than in July.
Examining the series month by month reveals modest initial declines: in January , the CPI for gasoline fell 1. These declines were similar to those in crude oil prices in January.
The declines accelerated in February, as the seasonally adjusted gasoline price index dropped 3. However, the February declines were outpaced substantially by the sharp decline in crude oil prices during the month.
Britain is considering offering state-backed loans to energy firms after big suppliers requested support to cover the cost of taking on customers from companies that went bust under the impact of gas prices. One firm, Bulb, is reportedly seeking a bailout. And in a week packed with central bank meetings, she added that markets were "right to fret.
Spain shocked the utility sector last week by redirecting billions of euros in energy companies' profits to consumers and capping increases in gas prices. Revenue hits at Iberdrola IBE. MC were estimated by RBC at one billion euros and shares in the companies sold off heavily.
Since the move, investors have fretted about contagion to other countries, Morgan Stanley said.
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