USAC gasoline prices reach record levels but demand remains strong

US Atlantic Coast gasoline prices continue to rise following the US ban on Russian crude and refined product imports as a result of its military incursion into the Ukraine.

While US retail gasoline prices have reached all-time highs at $4.31/gal, prices in mid-Atlantic states are higher than the national average, according to travel club AAA in a March 10 statement, with New Jersey prices at a regional low of $4.37/gal and New York City at a regional high of $4.50/gal.

AAA also launched a survey on the impact of high retail gasoline prices on driving habits. About 60% of respondents said they would drive less when gasoline prices reached $4/gal, and 75% said they would make changes if pump prices reached $5/gal.

Despite pump prices breaching the $4/gal mark, there is no indication that demand destruction has kicked in yet, according to Patrick De Haan, analyst at GasBuddy.com, which tracks real-time fuel prices at more than 140,000 stations in the US and Canada.

"Our own gasoline demand data is showing [Sunday-Wednesday] demand up 3.1% over the same time period a week ago," he said.

De Haan noted that prior experience has shown that people don't always cut driving when they say they will, adding "This will be interesting to watch play out. But I suspect there is a big disconnect between talk and action."

Ample supplies

The USAC is well-supplied with barrels of winter grade gasoline and the market can wait out the volatility and spikes of the NYMEX, according to market sources.

"The market received a ton of imports at the end of February," a source said.

According to US Customs data, USAC February imports of gasoline and blendstocks like RBOB totaled over 9.5 million barrels, or about 340,000 b/d. This includes 22,725 b/d of Russian naphtha imported into the New York Harbor.

The ban on VGO could force USAC refiners to look for alternative feedstocks for their FCC units and cokers, which could keep prices high. USAC imports of Russian VGO averaged about 28,000 b/d in 2021, So far in 2022, volumes have fallen off to average 3,700 b/d.

According to commodity tracker Kpler, total USAC gasoline imports in so far in March are averaging 3.06 million b/d, compared with the 10.6 million b/d in February. March volumes include 38,000 b/d from Russia due to arrive in early-to-mid-April, which is acceptable under the ban, which grants a 45-day grace period for US sanctions on Russian energy imports to wind down existing contracts.

Pent-up demand

While some USAC market sources say they may be seeing some consumer hesitation about high gasoline prices but feel extenuating circumstances could keep demand strong – at least in the short term.

"The flat price value is not going to matter much with a strong economy. The market is short term supplied," said one USAC market source.

The price of USAC RBOB cargoes have risen since the ban was put in place at the end of February, averaging $3.30/gal so far in March 2022 compared with February's $2.70/gal average, according to Platts assessments. The price rise is due in part to the rising price of crude which topped $120/b on supply fears. But many market sources don't feel the rise in both retail and spot gasoline prices will have an immediate impact as coronavirus restrictions over the past three years has created pent-up demand waiting to be unleashed.

"Covid cases are low, country is open and weather is warming," said another USAC market source.

This sentiment is supported by the AAA survey.

"Looking ahead, 42 percent of those with summer travel plans said they would not make any changes despite the high price of gasoline," AAA said.