Jan. 25 (UPI) -- U.S. federal data from Wednesday suggest total demand for refined petroleum products, including gasoline, are off from year-ago levels, though so too is recent production, which could hint at further increases in retail-level prices.
The U.S. Energy Information Administration reported Wednesday that the total amount of refined petroleum product supplied to the market, a proxy for demand, averaged 18.9 million barrels per day during the seven-day period ending Jan. 20, nearly 11% less than during the same period last year.
Data from the similar week in 2020, to discount the strains of the COVID-19 pandemic, showed the amount of petroleum products supplied to the market was closer to 20.5 million bpd.
Improvements in energy efficiency and a gradual pivot away from fossil fuels would explain some of the decline, but inflationary pressures and elevated gasoline prices may also be curbing demand.
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While usually stripped out to determine core inflation, the energy component of the U.S. Consumer Price Index shows a 7.3% increase over the 12-month period ending in December, compared with total inflation of 6.5% over the same period.
Meanwhile, the price for West Texas Intermediate, the U.S. benchmark for the price of oil, hasn't changed much since the start of the year, though the current $80 range is the highest since November.
Retail gasoline prices are also on the rise, and recent data show that trend could continue.
After running hot for much of the latter part of 2022, refinery activity is slowing down. EIA data show the nation's refineries operated at around 80% of their peak capacity during the reporting period.
That in turn led to a small decline in gasoline production, from 8.9 million bpd the prior week to 8.8 million bpd.
Refineries last week were running at 85% of their peak capacity. That could change for the worse over the next few months as refiners enter a period of seasonal maintenance ahead of the late-spring drive to make the summer blend of gasoline.
A further decline in refinery activity would limit future production, driving prices higher on supply-side strains. The summer blend of gasoline, meanwhile, is more expensive because of the additional steps needed to keep it from evaporating in warmer months.
To make matters worse, the so-called 3-2-1 crack spread -- named as such as refineries can turn three barrels of oil into two barrels of gasoline and one barrel of fuel oil -- is high enough that refiners are getting a good return on products, which supports a higher-for-longer outlook for the price of crude oil.
Travel club AAA lists a national average retail price of $3.48 for a gallon of regular unleaded, an increase of nearly 4% from week-ago levels. WTI was up around 1% as of 11:40 a.m. EST to trade at $81.06 per barrel.
