Released on September 10, 2003
(Next Release on September 17, 2003)

Careful With Comparisons
Many analysts, including here at the Energy Information Administration (EIA), often compare the current situation to the same period a year ago. When it comes to inventories, last summer showed levels towards the middle of the normal range (see Figure 2 in the Weekly Petroleum Status Report). Thus, comparing inventories this summer to those last year was a reasonable comparison, since last year inventory levels were fairly normal. But the situation began to change last September and this will require analysts to be a little more careful in upcoming weeks when comparing inventories to year-ago levels.

During the summer of 2002, crude oil inventories (see the September 18, 2002 and the October 2, 2002 editions of This Week In Petroleum for a more detailed review of the situation last year) declined sharply. At the end of May 2002, crude oil inventories were in the top half of the normal range, but by August 2002, they had dropped to slightly above the low end of the normal range (see Figure 3 in the Weekly Petroleum Status Report). But September 2002 brought a drop in U.S. commercial crude oil inventories of nearly 26 million barrels in a month that would typically be expected to show a decline of about 7 million barrels. Of course, two reasons for this sharp drop were Tropical Storm Isidore and Hurricane Lili; both storms coming towards the end of the month and the beginning of October. What is important to note here, however, is that comparing inventories to year-ago levels at this point may not provide an accurate perspective on the adequacy of current inventory levels. This is one reason why EIA calculates an average range over the last 5 years in determining a “normal” range. Other analysts prefer using the maximum and minimum seasonal levels over the last 5 years to determine an average range, although this may imply that any level between these extremes in the last 5 years is normal. Nevertheless, however “normal” or “average” stock ranges are calculated, it is important to use them in analyzing current levels, rather than simply comparing to year-ago levels. Looking at the current inventory situation using EIA’s approach to characterizing the normal range, we can see that U.S. commercial crude oil inventories have been below the “normal” range since the end of September 2002, except for a brief period around the end of October 2002 (again, see Figure 3 in the Weekly Petroleum Status Report). The past week’s drop of over 4 million barrels in crude oil inventories will not make it any easier for inventories to return to “normal” levels, despite how comparisons to year-ago levels may appear. Such a return only seems possible with an increase in world oil supply, both to provide the physical amounts of oil that are needed to replenish inventories, and to bring world oil market prices into a range where buyers will find it attractive to carry larger inventories.

U.S. Retail Gasoline Prices Decrease by Nearly 3 Cents
The U.S. average retail price for regular gasoline fell last week by 2.9 cents per gallon as of September 8 to reach 171.7 cents per gallon, which is 32.2 cents per gallon higher than a year ago. This is the second week in a row that prices have fallen, after significant price increases during the four weeks prior to the Labor Day holiday, and may be the beginning of the substantial price decline that was expected to occur this month. Prices were down throughout the nation last week, with the Gulf Coast seeing a decrease of 2.3 cents per gallon to hit 156.9 cents per gallon and the East Coast seeing a decrease of 2.0 cents per gallon to reach 169.0 cents per gallon. Prices on the West Coast remained the highest in the nation, despite dropping 1.9 cents to end at 202.7 cents per gallon, and California prices averaged 208.5 cents per gallon after falling 1.5 cents this past week. Increases in gasoline inventories, due to recent record imports and high domestic production coupled with declining demand, should continue to put downward pressure on gasoline prices in upcoming weeks.

Retail diesel fuel prices decreased last week by 1.3 cents per gallon as of September 8 to a national average of 148.8 cents per gallon, which is 9.2 cents per gallon higher than a year ago. Retail diesel prices were down throughout the country last week, with the West Coast seeing the largest price decrease of 4.0 cents per gallon to reach 164.1 cents per gallon. The Lower Atlantic region continued to have the lowest retail diesel price in the country at 141.7 cents per gallon as of September 8.

Propane Inventories Continue Higher
The strong summer buildup in propane inventories continued into September with a nearly 1.0-million-barrel gain last week that propelled inventories of propane up to an estimated 63.7 million barrels as of September 5, 2003. Moreover, the weekly build accounted for more than half of the average September build recorded over the most recent 5-year period. Consequently, even if inventory gains through the end of the month remain in the normal range, the possibility exists for the September stockbuild to exceed the average build for the fifth consecutive month. Regional gains were mixed last week with inventories moving higher in the East Coast and Midwest regions by 0.1 million barrels and 1.1 million barrels, respectively, while in the Gulf Coast, inventories fell by nearly 0.3 million barrels during this same time. Propylene non-fuel use inventories fell by 0.2 million barrels last week to 3.4 million barrels, a level that accounts for 5.4 percent of total propane/propylene inventories.

Note: Text from the previous editions of "This Week In Petroleum" is now accessible through a link at the top right-hand corner of this page.