How did gas prices get where they are in 2021 and what are some long-term implications for where gasoline demand and prices are going over the next few years? All that and more on this week’s episode.
Hosted by:
Jeff Lenard, VP Strategic Industry Initiatives, NACS and Donovan Woods, Director of Operations, Fuels Institute
About our Guest
Denton Cinquegrana, Chief Oil Analyst, Oil Price Information Service (OPIS)

In more than a decade with OPIS, Denton has covered nearly all markets for which OPIS has price discovery. Before being named Chief Oil Analyst, he was Executive Editor for U.S. Refined Products, overseeing day-to-day market coverage operations. During his time as a Markets Editor, his primary focus was on the heavily benchmarked U.S. West Coast. He graduated from Rutgers University in 1997 with a degree in Journalism and Mass Media.
Episode Transcript
Convenience Matters Intro music:
You’re listening to Convenience Matters brought to you by NACS, whether it’s for food, fuel drinks or snacks, about half of the U.S. Population shops at a convenience store every day. We’ll talk about what we see at stores and what the future may hold for our industry.
Jeff Lenard (00:27):
Here it is, Spring 2021 and a thing that’s the topic of the news is where are gas prices going, why did they get there, what might happen this summer and what are some long-term implications for where gas, demand and prices are going over the next few years. We’ll talk about that today.
Jeff Lenard (00:43):
So social media is all lit up over ‘gas prices are this,’ ‘they used to be this,’ ‘who’s to blame,’ ‘why are they going up,’ ‘when’s it going to stop,’ ‘what will the summer look like?’ Because, as we get more vaccines out there, when will things return more to normal in terms of commuting, demand, supply, all those other issues. The good news is we have those answers for you today. We have an industry expert that will take us through all these things. Denton Cinquegrana who is the markets editor with Oil Price Information Service, better, known as OPIS. So welcome Denton.
Denton Cinquegrana (01:20):
Hey guys, thanks for having me.
Jeff Lenard (01:22):
And I should probably start off by saying my name’s Jeff Lenard, I’m with NACS.
Donovan Woods (01:29):
And I am here with you, Jeff today. My name is Donovan Woods with Fuels Institute and NACS.
Jeff Lenard (01:33):
That’s basically how you blame, uh, working at home and not looking each other in the face. So, we’re all here. And, let’s just start off Denton with, just the first setup in right now. It is late March and prices are dancing with $3 a gallon. They are at about $2.88 a gallon they’re kind of hanging at that level. Um, what is going on with this price increase we’ve seen over the last few months,
Denton Cinquegrana (02:05):
So there’s actually a lot going on and Jeff set it up perfectly. When you said, you know, about social media, you know, flaring up, over gas prices because, you know, there’s, if there’s one thing that people remember is what they pay for gas. So, you know, obviously the three things that move the needle are politics, religion, and gas prices, honestly. And you know, I think what you have to do is take a step back to see where we’ve been to see where we’re going. So obviously demand took a huge hit in 2020 there’s. There’s no question about that. Annual demand levels were, were compared to the mid nineties, mid and late nineties. You have obviously from the pandemic, the impact there. Refineries had to slow down production just because margins were bad. Uh, demand was poor, obviously. And then you had OPEC come in and reduce crude oil production.
Denton Cinquegrana (02:57):
And so that brings us back to the kind of late last year, when prices just started to, you know, kind of bottom out, find their footing, the negative price for on April 20th last year, not withstanding, of course, that is probably something we’ll never see in our lifetimes in a negative future settlement for crude oil. Uh, you know, you never say never, but, 99.9% sure that’ll never happen again. Um, but so we we’ve started to price. It started to move up at the, at the beginning of the year. And a lot of that was really kind of based on hope, hope that vaccinations would ramp up, uh, with a lot of speed, hope that there’s this pent up demand and, you know, sometimes hope it’s not the best policy there. Um, so what we’ve seen is price is still continuing to move up on that hope that the pent up demand, the, the vaccination rollout, which, you know, at times has been clumsy, at times as it has shown quite some success. So, um, that’s been a good sign. Now we wait to see what happens with, with summer demand. I think there’s some, some predictions out there that we hit some really high numbers during the summer. I think you might get some, some high, weekly numbers, but as far as, you know, kind of annual demand for 2021, I still don’t think we break 9 million barrels a day. And I don’t think on average, and I don’t think we take out some of these 2019 levels. I still think we’re going to trail 2019 as far as demand is concerned.
Jeff Lenard (04:25):
And, for the record, uh, the last couple of years we’ve been sitting at about 9.3 million barrels a day. So nine, 9 million is what about a 10, um 3% drop, um, which is a lot better than the 13, 14 range we saw last year. But, but still, with some of the predictions being that there’s so much, um, there’s been a lot of devastation in the country and there’s been a lot of people who have really suffered, but there’s also been some people that have kind of been sitting on money. And, uh, you’ve heard these, these predictions that, um, they, they are ready to spend, and that could mean pretty heavy travel this summer and in other spending in, in the markets. So whether it’s for clothing or convenience items.
Denton Cinquegrana (05:10):
Sure. And, you know, we did see a little bit of that last summer. I think, you know, last summer people were afraid to get on planes. So instead they did more of the road trip type thing. Um, you know, personally, you know, drove down to South Carolina from, from New Jersey and in June of last year, just because we’re dying to get out of here, you know, and that’s not just the New Jersey joke. That’s just a w we want to go somewhere.
Donovan Woods (05:32):
Are you sure about that, Denton? I don’t know.
Denton Cinquegrana (05:35):
I’m positive. You know, I can’t take the pizza anywhere else, but, um, no, it’s one of those things where it’ll be interesting to see if that happens again this year. I know we’ve seen over the last couple of weeks, uh, reports that TSA has cleared more travelers for, for air travel, uh, than they have, you know, it’s back above last year levels, which again, not that impressive considering what we were going through a year ago. Um, so it’ll be interesting to see if that you’ll kind of shifts demand from, from one molecule to the other, from the gasoline molecule to the jet fuel molecule. I wouldn’t be ready to bet on that. I think, you know, gasoline will have, you know, some weeks where it’s really strong.
Donovan Woods (06:20):
Can I, can I ask the question Denton, I guess, and well, first of all, let me set this up this way. Um, so that if we have more personal jokes throughout this, and you make fun of the Cowboys, I make fun of the Giants, things like that. People know that you’re pretty much our one or top one or 2% of our guests that have been on this show. I think you’ve been up here. This is your fourth appearance. So congratulations. There’s no prize, but thank you very much for doing that. My question, I get confused. And I think because working on the Fuels Institute side, I’m seeing different things. I’m looking at, you know, you know, internal combustion bands. I’m looking at EVs, I’m looking at a lot of different things all the time. And I start to look and go, okay, last year we saw there was gonna be a dramatic drop off in gas.
Donovan Woods (07:00):
People weren’t going to be driving as much now that happened. But at the same time we saw VMC or vehicle miles travel didn’t really match that. People still were doing things. They may not have been going on the same routes to work, but maybe they were taking kids here or there, or whatever the case may be. So how do you explain, or what’s your theory for, even though there was, or there is a pandemic going on and it changed travel, um, for, you know, in ways we never thought we’d ever see in our lifetime, did it really drop off that much in terms of consumption? And does that really – and I think that’s what confuses, um, when you call it consumers – because they see prices kind of going up and they’re going well, nothing really changed for us. How do you explain that?
Denton Cinquegrana (07:45):
Yeah, so I think, you know, again, it’s, it’s been an honor to be on here for four times, and I know there’s no prize, but hopefully after the fifth time you guys teach me the secret handshake that’s what I’m looking forward to most, but, um, you know, the whole dynamic between fuel demand and VMTs, you know, just think about how much more fuel efficient the vehicles we drive today are. So I think that you, you might see, let’s say, you know, instead of having gas guzzlers, you have more guests sippers so to speak. So I think there’s been a little bit of that that makes the whole demand, VMT, dynamic, maybe not match up as it once did, uh, like you said, internal combustion engine bans, electric vehicles, hydrogen is a new hot topic. Donovan, if you remember, you know, kind of a personal story, when we were at that one Fuels Institute meetings, we went to that one station in San Francisco that had the hydrogen dispenser.
Denton Cinquegrana (08:40):
That was pretty neat. So, that would be probably the closest thing you would to your kind of typical, you know, kind of gasoline station, but, kind of get off topic there, but, in the grand scheme of things, even with this push to, ban the internal combustion engine, you know, gasoline is going to be around for quite a while. Uh, if you look at some of the data, as far as, uh, EV sales, I mean, certainly they’re making inroads, but it’s going to take a long time.
Jeff Lenard (09:11):
So in thinking about gas prices, traditionally, we, we explain gas prices. They follow oil prices. When oil prices go up, there’s 42 gallons in a barrel. When oil prices go up, a dollar gas prices tend to follow. We don’t predict they will, but they tend to. And historically that plays out over time. In the spring, we also see about a 50% run, a 50 cent per gallon run-up, related to the switch over to summer blend fuel. And that requires some refineries, um, to create re jiggering operations for different production. Uh, the, the more expensive fuel blends of boutique fuels all those things in higher demand from February on all those things lead to about a 50 cent run-up. And that’s about what we’ve seen since the beginning of the year. Now, you had mentioned earlier that, um, there’s three things that you’ll see on social media and it’s, um, gas prices, religion, and politics. Let’s take, we’ll set aside religion. We’ll save that for the next time, but gas prices and politics. Certainly you’re seeing a little bit more about, well, gas prices are increasing because of this or they’re increasing because of that. Um, now sometimes it’s causal , and sometimes it’s a casual relationship is what we’re seeing right now. We have a new administration we’ve seen a ramp up in prices. What type of direct relationship is there, uh, for those who want to put out something on social media?
Denton Cinquegrana (10:42):
Okay, well, let’s, let’s first start with gas prices are not moving up because the Biden administration canceled the Keystone XL pipeline, but let’s just throw that one out there right now. That one is just, it’s just not grounded reality basically, but, um, I think some of the rise is on, you know, the administration and the incoming administration or the now current administration’s, um, kind of more climate fighting, agendas being more friendly to biofuels and probably less friendly to oil in general. So I think there’s a little bit of that kind of driving up prices in that you may have the bans on, on fracking, uh, and things like that, which we have not yet seen. I think if anything, there’s going to be a moratorium on new licenses. So I think that’s, that’s driven up prices, but again, you know, I think it’s, it’s, it’s a lot of it has to do with, not a lot of it, but there’s a good portion of OPEC taking some production off the market and being quite disciplined, you know, in years past when prices go up, wyou always had the OPEC cheaters that they’re trying to reign in.
Denton Cinquegrana (11:53):
And at the same time, you know, U.S. Production has dropped significantly because prices had dropped significantly in 2020. And now not, you know, now that prices are at a more acceptable level for those producers, uh, in places like West Texas and, you know, in those areas. And they’re actually being a little bit more prudent this time around too, because the one phrase that’s been thrown around is capital discipline. Basically they’ve been, you know, their investors want some money back now. So if they come in and rush out with a bunch of production and bring production levels back up towards 13 million barrels a day where they were, you’re going to see prices, prices drop, and then they’re not gonna have as much cash flow to give back to their investors. And whether that’s, uh, in the form of a dividend for their shareholders or the banks that they owe money to etcetera.
Denton Cinquegrana (12:45):
And so I think they’re being a little bit more disciplined. So you’re seeing less oil, less oil on the markets these days, but at the same time, you don’t need as much oil. I mean, considering gasoline demand is it’s still down. Year on year. Diesel demand has gone through fits and starts. And, you know, it’s pretty close to where it’s been, but jet fuel demand is way down. So, you know, you don’t need as much oil. And then there was the whole thing last month from, uh, you know, the deep freeze in Texas that forced down a lot of refineries that probably more so than the rise in oil prices, or at least the, maybe a 50/50 amount will contribute to, to gasoline prices moving up the way they have really over the course of mid February through through much of March.
Donovan Woods (13:27):
That’s a great point. You sometimes forget about life. And I know we tried to keep, this is podcast and all things you do kind of evergreen, but that mentioning what happened in the winter of 2021, um, with Texas and that shutting down, it was a lot more dramatic, I think, than I think many people thought, especially when you don’t live there, you just assume it’s bad, but when you’re living there, it’s probably worse. But just to go back a little bit from a consumer point of view, what can we expect in terms of, as things continue on, you mentioned what you, your thoughts on the different types of reasons why, um, fuel consumption is going down, whether it’s people buying more efficient cars, which is what’s happening, but also people buying smaller cars or EVs, or maybe hydrogen what’s your projection for 2021 in terms of not so much pricing, but just consumption and what people are going to be doing patterns-wise as we move into the summer.
Denton Cinquegrana (14:23):
Well, I think it’s, you know, again, you don’t have to be Nostradamus to say gasoline demand is going to be better in 2021 than it was in 2020. I think, you know, like I mentioned before, I think it’s going to be difficult to match the, the 2018 and 2019 levels. And I think those are going to be the benchmarks, uh, that summer is going to be set up against I see improvement, but I just don’t see this huge kind of spike in demand that that some are really calling for. I still think, uh, and again, it may not necessarily be a huge chunk of the pie, but there’s a lot more folks working from home now and not going back, you know, personally, you know, we don’t, I don’t have an office to go all my basement is now my office. So, uh, that’s, that’s where I’m working from these days and, you know, it is what it is.
Denton Cinquegrana (15:11):
Uh, and again, you know, I think a lot of the lost demand last year was from social events, going to ball games, go into, you know, an arena to watch a basketball game, people traveling to, to the NCAA tournament, things like that go to the bowl games during college football season. So some of that will come back obviously with, with more fans being allowed in stadiums this summer. Uh, so there’s that social aspect that we probably maybe discounted a little bit last year, but I think that’s going to be one of the things that, you know, we’ll be talking about road trips and stuff like that, but I think the social aspect of going to a ball game, uh, will kinda, you know, kind of help demand along the way, but again, I think it’s going to be difficult to achieve those 2018, 2019 type level.
Jeff Lenard (15:54):
So will these road trips just be traditional family vacations or will they be because the town rips the bones from your back?
Denton Cinquegrana (16:02):
I think…
Jeff Lenard (16:04):
That’s a Jersey Springsteen reference. Sorry.
Denton Cinquegrana (16:06):
That’s right. That’s right. That’s right. Um, yeah, let’s not mention that he was arrested pretty much like right near where I live, so a couple of weeks, but anyway, um, you know…Oh God, I lost my train of thought there talking about The Boss…But, um, I still think there might be a little bit of apprehension about getting on planes. Uh, you know, I think just about everyone is vaccinated. I think that there’s still going to be a little bit of apprehension there. So there might be a preference to do more, more of the road trips and, you know, I don’t think I’d ever do it, but to drive to from New Jersey to Disney World seems like something I would never want to do, but you know, did it to South Carolina last year and, uh, you know, obviously it’s several hours difference, but again, it was, it was, it was, it was tough. You know, you think just driving is an easy thing, but, it can give you, it can take a wear on you. So, uh, but I do think the road trip might be the preferable way to do it.
Jeff Lenard (17:09):
Donovan, one of the things that, we’ve talked about both NACS and the Fuels Institute is, is the idea of routines. And once you settle in a routine, it’s tough to break a routine. And, and Denton, you talked about, um, now working at home and people are, are increasingly perhaps going to, um, stay at home. Uh, same with I would imagine saying with road trips, that it’s last summer, it was in the rear view mirror things always, you remember more of the good things and you forget some of the bad things about road trips, but, um, when you think about this summer, uh, we have a survey out with our members right now asking when do they expect that things, demand will feel about back to where it was before the pandemic. And I think right now it’s still in the field, but a slight majority say that this summer they feel pretty good.
Jeff Lenard (17:56):
That will be, it’ll be back to where it used to be, but there’s a, still a significant percentage that said 2022. So I think it really depends upon where you are, where you’re located, where your store is, what your customer base is. But, um, you tie that to what you’re talking about fits and starts that it’s not going to be that that’s that linear path that we traditionally see that and hope is involved hope. And I suppose a little, little fear, um, which is the opposite of hope because it’s supply, demand, and then as perceptions about the, what ifs and we saw oil prices, crater, I think as much because of the concern about fear, the fear related to a vaccine rollout, not here in the U.S., But in Europe where it’s a little bit more of a mess and all of these things in a normal year, make it pretty chaotic to kind of point out what the big trend will be, because you’re just one news headline away from everything changing.
Jeff Lenard (18:56):
And now we have all these balls up in the air, but, it looks like based on what you’re saying and based on the numbers, you’re looking at that a slight decrease year to year, but we’re moving in the right direction and hopefully things will settle down. And, and you also touched upon, uh, upon more of the long-term, and, Donovan was talking about that, but are there things that we might want to be looking at, um, beyond some of the, you mentioned some with the Administration and some of the new vehicles and things like that, but big picture things, what are, what are things that people should be saying “Hmm, that’s that’s interesting” and more than interesting, that could be impactful.
Denton Cinquegrana (19:41):
Well, I think in the, you know, kind of future, but near future, uh, guessing demand comps are going to start looking spectacular. You know, when you compare where we’re going to be in the middle of April versus the middle of April last year, don’t be seduced by that. Um, but also at the same time, you know, retail at right to retail margins are going to be much lower than they were a year ago as well. So that might be a bit of an evening out. I think refiners in the second quarter are going to be, you know, bragging about how great their margins were, uh, just because they were so poor in the second quarter of last year. So that’s kind of the, the upfront type things. Uh, if you pay attention to the Wall Street, big investment banks, and, you know, you start to hear the term Supercycle, I don’t see how that’s going to happen.
Denton Cinquegrana (20:32):
You see the calls for eighty and a hundred dollar crude oil I still think there’s potential for higher prices, but, you know, eighty to a hundred dollars, I don’t see it with everything that’s laid out in front of us right now. Its at about just under 60, we, have been dropping over the last couple of days. We ran up to about $67 on WTI. So we’re, we’re down a good 10 bucks or so from there. So again, the rising gas prices that you were talking about in that, that kind of correlation, uh, we should probably see, start to see what we’re going to start to see gasoline prices, you know, plateau, and then start to cool off and drop, even as we get into the the RVP transition to the, to the summer grade gasoline, which, you know, not, it is a little bit more kind of, you know, quote-unquote, inside baseball, but, you know, the EPA, passed these new rules and the streamlined gasoline, that’s gonna make it, you know, potentially a little bit easier.
Denton Cinquegrana (21:34):
So when gasoline gets tested for, you know, through the big testing companies, they test for a bunch of different things and cities like DC and throughout New Jersey and New York and Philly, and the major cities where you have to use reformulated gasoline, they had what was called the complex model. The things are going to be testing for now, our sulfur content, RVP and benzene. So those are the three big ones versus just a litany of tests that they used to have to pass. So, with those three things, being the key to those tests, the gasoline is probably going to be a little bit easier to make and again, I’m not a chemical engineer, so, you know, can’t get too deep into it, but, you know, reading the rules from the EPA and everything, and what that might also do is you may have a refinery say in Europe that wants to export gasoline components to the U.S. And they may not have been able to make the specification for one of those things that used to be tested in the complex model.
Denton Cinquegrana (22:37):
Like maybe some sort of aromatics, but now, because it’s just, “Oh, but we, we made it on the sulfur” or “made it on the RVP,” “and our benzene is good enough.” Then you might open the door for more imports from Europe and Jeff, like you said before Europe, to call their vaccination program right now, clumsy might be the biggest compliment you could give them. Uh, you know, they’re going to see potentially, especially if this is, if this is, you know, kind of longer-term in Europe, a lot more components and pieces that go into making the gasoline molecule coming to the U.S. As well as, as well as diesel their diesel demand is way down in Europe because of, because of lockdowns and, and, the various ways of COVID and the variants, etcetera. So, uh, you know, I think the summer is going to be going to be interesting. And I think right now you have a motivation for refiners to produce gasoline because the, uh, the margins are, you know, certainly acceptable.
Donovan Woods (23:39):
Can I, can I add something to this? Just, just as we wrap up a little bit here, Jeff, and I want to bring in our audience to something that’s related to just retailers in general, not just a fuel markets out of it. Uh, just quick story. My closest friend is moving back from Austin, Texas to, um, the DC area. So for him, everything has always been the last 10 years, QT [QuikTrip], you know, that that’s his place to go. And I asked him, this is just yesterday. So, you know, he said, “why don’t you guys have any QTs up here or….”And I said, you know – a QuikTrip, sorry – I said, “we have Sheetz. Or we have Wawa, we have certain other retailers.” He goes, “man.” So I said to him, “well, where were you going to get your gas?”
Donovan Woods (24:19):
And he just said, I” don’t know, wherever,” but in his mind, QT was more than just fuel. A retail station was more than just fuel. And I kind of measure life on what my friends think and things like that. So if the idea that consumers are beginning to look at your stores as more than just a fuel place or destination, I think that’s a good thing where you may see consumption dropping, or we’re kind of just really finding what the new normal is at the same time. You know what I did find them this last year, Jeff and Denton, I’m a fast food junkie and I’m trying to change but it’s hard. When I would go to my certain fast food establishments late at night, a lot of them were closed because of the pandemic. They changed their hours and reduced hours, but you know, who was always open? My local convenience store and I won’t name chains to be favored, but I do have a favorite or here or there, but they were open and they have fresh food and it was always available regardless.
Donovan Woods (25:11):
So as a retailer, in my mind, from the Fuels Institute side of things, looking back at the NACS side of things, things are going to change with fuel its going to continue to change. But what you can do is be prepared by always just having what your consumer or customer wants, whether it’s fuel, or also being able to feel their body is kind of our tagline and the Convenience Matters logo or tagline, but that’s just my 2 cents. And I, you know, I’ll leave it to you, Jeff, to wrap this up, but again, thank you Denton for all that good information. I appreciate it.
Jeff Lenard (25:37):
Yeah. And just to amplify that, that’s, that’s where we’ve been moving as an industry. We want to be, and we’ve seen that over the last couple of years, we’ve been as much known for what’s inside the store as the price of gas. And in certainly the past year and a half has been bumpy a year, plus I should say. Um, and in, hopefully we can return to that, that, uh, time when focus on the in-store offer, there’s seating, there’s some of those other things that amplify the food and, um, you know, we can, we can evolve, um, and also look long-term and do some of the things that the Fuels Institute is doing. So Denton, next time when we have you on, we’ll talk more about some of these trends and we’ll also each bring our playlist of our favorite road tunes, because, obviously fuels and some music go hand in hand and we can share some of those. So, I don’t have any walkout music because our budget doesn’t include that. So I don’t know.
Donovan Woods (26:34):
Is it possible…I was going to say, could we somehow get our engineer to kind of tie in your favorite song by Michael Jackson?
Jeff Lenard (26:38):
Oh yeah. Well, as long as we play like six notes and the seventh has to be off key or something like that. We’ll figure that we’ll leave that to Blake, uh, to play, to misplay some music. So we don’t get sued. And, until then, thank you once again, Denton and thank you all for listening to Convenience Matters.
Related Links:
NACS Fuels Resource Center
OPIS Blog
OPIS Homepage
Fuels Institute Report: Proposals to Ban the Sale of Combustion Engine Vehicles