Released on March 29, 2006
(Next Release on April 5, 2006)

In Retrospect
Although spring officially began at 1:26 p.m. EST Monday, March 20, 2006, some folks who live in a wide swath of the country stretching from the Rocky Mountains to the Ohio Valley would probably dispute what the calendar was telling them, following a powerful snow storm that paralyzed many parts of this area last week. The surprise storm, one of the worst this year, was actually a late aberration in a winter that was unseasonably warm. But with spring-like temperatures just a few weeks away, these last vestiges of winter are not likely to have any significant impact on statistics for the 2005-06 winter heating season, which for EIA’s purposes runs through the end of this month.

What began as a potential crisis for petroleum heating fuel markets in the aftermath of Hurricanes Katrina and Rita, did not materialize, as these markets essentially weathered the 2005-06 heating season in much better shape than many petroleum market analysts had anticipated. Although heating fuel prices quickly adjusted upward following the devastating effects of the hurricanes, generally mild temperatures prevailed in much of the United States over most of the winter, reducing demand and helping to calm these markets over this period. Distillate fuel inventories, including heating oil and diesel fuel, fell a paltry 3.5 million barrels from the end of September 2005 through March 24, 2006. Comparatively, the 5-year average stockdraw for distillate fuel during the October through March period totals about 17.5 million barrels. The absence of a significant stockdraw reflects the weak level of heating fuel demand this past winter, leaving distillate inventories 16.6 million barrels above the same period last year, and well above the average range for this time of year. EIA’s pre-season outlook had called for 2005-06 heating oil prices to be as much as 30 percent higher in the Northeast compared with the previous year. However, with the mild winter, average heating oil prices, although still high by historical standards, were only about 23 percent above the prior-year average.

Ironically, what appeared to be a potentially dire situation for heating fuels if the United States experienced a cold winter, actually turned out to be quite different, as a result of the milder temperatures. Moreover, the mild winter may have offered additional benefits that may be apparent in the coming months, by lessening the need to replenish heating fuel inventories, thereby freeing refinery capacity to produce more gasoline ahead of peak summer use.

U.S. Average Retail Gasoline Falls 0.6 Cent
The U.S. average retail price for regular gasoline fell 0.6 cent last week, dropping to 249.8 cents per gallon as of March 27, which is 34.5 cents higher than last year. Prices were mixed throughout the country, with the West Coast seeing an increase of 3.8 cents to reach 260.9 cents per gallon, the highest regional price in the country. California prices rose 3.4 cents to 266.9 cents per gallon, 29.3 cents higher than this time last year. East Coast prices fell just 0.1 cent to 249.6 cents per gallon, while Midwest prices dropped the most, regionally, falling 3.0 cents to 247.1 cents per gallon.

Retail diesel fuel prices decreased by 1.6 cents to reach 256.5 cents per gallon as of March 27, which is 31.6 cents higher than last year. Prices were down throughout the country, with the Gulf Coast seeing the largest regional decrease of 2.4 cents to 252.8 cents per gallon. West Coast prices, still the highest in the nation, lost 1.8 cents to 269.8 cents per gallon.

Propane Stockdraw Near March Record
U.S. inventories of propane continued sharply lower last week, dropping by 1.7 million barrels to settle at an estimated 29.2 million barrels as of March 24, 2006. With last week’s draw, propane inventories have fallen by 7.1 million barrels this month, only 0.3 million barrels below the all-time March record of 7.4 million barrels reported in 1999. Continued unseasonably cold temperatures in many parts of the Nation contributed to the steep decline in inventories last week. Regional inventories remained unchanged in the East Coast last week, while in the Midwest, inventories declined by 0.4 million barrels. However, most of the weekly decline occurred in the Gulf Coast where inventories fell by 1.3 million barrels. Inventories in the combined Rocky Mountain/West Coast regions moved down by 0.1 million barrels during this same time. Propylene non-fuel use inventories declined by 0.1 million barrels during the week to account for a slightly higher 8.6 percent share of total propane/propylene inventories, up from the prior week’s 8.4 percent share.

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.