April 8, 2021

Gasoline prices were essentially unchanged  in the week ending April 5 at $2.86 per gallon.  In South Carolina gasoline prices tend to about $0.25 below the national average or about $2.61`.  The EIA expect gasoline prices nationally to average $2.66 per gallon this year and $2.59 next year..

Crude prices fell about $2 in this past week to $59 per barrel.  OPEC says it is going to increase production so crude prices should stabilize around their current level.

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 demand rebounded and inventory levels declined and are supply and demand are roughly in sync.

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 have been sharply curtailing 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