Week in Petroleum: At the crossroads

With the Labor Day weekend behind us, along with peak summer gasoline demand, retail gasoline prices would be expected to soften

As refiners were preparing for the summer gasoline season during spring of this year, retail gasoline and diesel prices stood at virtual parity, with only a penny separating their respective average monthly prices at the pump during April 2007.
At that time, “This Week In Petroleum” discussed the possible relationship between gasoline and diesel prices during the 2007 summer driving season. The typical pattern in recent years prior to 2005 had been for gasoline prices to rise above diesel prices during the spring and summer months.

However, in 2005, just the opposite relationship occurred through spring and much of summer, reflecting diesel fuel’s emergence as the fastest growing petroleum product, especially in Asia and Europe. The premium for diesel during the summer of 2005 eventually dissipated, but only as Hurricanes Katrina and Rita wreaked massive damage and extensive disruption to U.S. Gulf Coast operations in August and September. Then, during most of the summer of 2006, diesel and gasoline prices were near parity, presenting a relationship falling between the 2005 experience and the typical pattern of earlier years. With gasoline and diesel prices once again at parity during the spring of 2007, and price patterns of recent summers providing very mixed signals, one question facing oil markets was which way the relationship between prices would turn during the summer of 2007.

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