(John Kemp is a Reuters market analyst. The views expressed are his own)
LONDON – Tremendous demand for gasoline in the United States has pushed refining margins for motor fuel to the highest seasonal level in a decade.
U.S. refiners currently earn a gross margin before costs and taxes of 65 cents per gallon for turning Brent into gasoline and 77 cents for processing WTI.
At the same point last year, margins for refining Brent and WTI were 37 cents and 51 cents respectively, close to their long-term averages.
The enormous profitability of turning crude into gasoline explains why U.S. refiners are running flat-out.
U.S. refineries are processing a near-record 16.6 million barrels per day (bpd) of crude, almost 350,000 bpd higher than in 2014 and more than 1 million bpd above the 10-year seasonal average.
Despite near-record runs, gasoline stocks remain modest, however, almost exactly in line with the long-term seasonal average, as strong demand from motorists absorbs all the fuel refiners can make.
Gasoline consumption is running at more than 9.5 million bpd, the highest level since the third quarter of 2007, the U.S. Energy Information Administration says.
From massive California to tiny New Hampshire, traffic on U.S. roads is growing at some of the fastest rates for a decade, according to state transportation agencies.
Traffic in California, the largest gasoline market in the nation, rose by 2.6 percent in the 12 months to May, compared with just 0.7 percent in May 2014 and May 2013 and 1.1 percent in May 2012.
In New Hampshire, one of the smallest markets, traffic was up 4.2 percent in May, compared with 0.7 percent in May 2014 and May 2013.
The summer driving season, from Memorial Day to Labor Day, or roughly June, July and August, normally sees the highest traffic on U.S. roads and strongest demand for motor fuel.
Early indications suggest this year’s driving season will be the strongest since 2007, before oil prices spiked and the recession hit in 2008.
Continued economic expansion and the 25 percent drop in gasoline prices compared with summer 2014 are encouraging motorists to use their cars more.
Strong fuel demand from consumers and a voracious appetite for crude from refiners have soaked up some oil production and helped oil prices recover from their first-quarter lows.
The key test for oil prices will come when the driving season ends and refineries enter the autumn maintenance season in September and October.
(Editing by Dale Hudson)
This article was from Reuters and was legally licensed through the NewsCred publisher network.