May 12, 2021

Gasoline prices declined $0.07 in the week ending May 10 .to $2.96 per gallon.  In South Carolina gasoline prices tend to about $0.25 below the national average or about $2.71.  The EIA expect gasoline prices nationally to average $2.68 per gallon this year and $2.59 next year..

Crude prices rose about $1.00 in this past week to $65 per barrel.

During the March and April recession last year  global economic activity to come to a screeching halt.  Demand dropped abruptly (the yellow line below), but production did not decline as quickly (the green line).   As a result, supply exceeded demand by about 7.5 million barrels per day in the second quarter (the blue bars) and inventory levels rose.  However, in the quarters since then inventory levels have declined .  But now the EIA expects demand to exceed supply for the next several months as the global economy gathers steam.  If so, crude prices could climb somewhat during that period of time.

In recent years fracking and horizontal drilling dramatically boosted U.S. production to 13,100 thousand barrels per day.  But given the drop in the global economy in the spring of last year and in corresponding drop in the demand for oil, production fell sharply and is expected to average only about 11.0 million barrels per day in 2021.

In the U.S. inventory levels rose sharply during the recession which is why U.S. producers  sharply curtailed production.  But now as the global economy has begun to climb those inventory levels are roughly where they should be.

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Stephen Slifer

NumberNomics

Charleston, SC