Another Pump Price Hike

But retail price (and margins) are peaking; rack prices tumbling fast, says Lundberg

Lundberg Gas Prices (CSP Daily News / Convenience Stores)

CAMARILLO, Calif. -- Retail gasoline prices climbed another 3.07 cents in the past two weeks, to a 14-month high average of $3.7225 per gallon, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. The price has now been rising for 12 weeks, totaling 42.81 cents since early February.

But this two-week rise is the smallest during the three months of hikes, and most likely will prove to be the last of the surge.

Crude oil prices plunged during the past few days, on super-high U.S. oil stocks and other factors, and refiners have been busy slashing wholesale gasoline prices. Refiners have also been busy running at very high rates of capacity. The result of lower oil prices and high refinery run rates is more gasoline at lower prices.

The oil market seems to care more about demand right now than supply.

Oil prices dropped despite the Ukraine crisis which, through threats of deeper Western sanctions on Russia, implicates oil supply from the world's second biggest oil exporter. The oil market seems to care more about China, whose weaker-than-expected manufacturing data implicate world oil demand.

Branded and unbranded rack prices are tumbling fast in most of the country as the Lundberg weekly website summary shows, including the West which saw some extended refinery repair periods, and retailers are collecting a bounty of wholesale price cuts. Los Angeles spot is down 27 cents in one week, and so is Los Angeles unbranded rack.

See below, or click here to view chart.

Northern California unbranded is down a dizzying 42 cents in the past week. Even DTW is already punctured, including a 12 cent drop, except for one brand, in the San Francisco area in the past seven days.

In the May 2 national two-week snapshot, the U.S. average retail margin on regular grade swelled by 6.99 cents per gallon to a very attractive 18.44 cents. There are some astronomically wide margins out there momentarily, but there are also a few markets caught on May 2 with unsustainably narrow ones.

U.S. refiners are probably not finished slashing wholesale prices. As the final phase-ins of higher cost Summer blend gasoline occur and seasonal demand strength kicks in with warmer weather, further rack price declines are likely--all if crude oil prices don't zoom up.

At the moment, refiner margin on gasoline is fat and retailer margin on gasoline is decidedly plump.

The average retail price has probably peaked already. Downstream margins will very likely do the same soon, perhaps after a few precious days in the sun.

Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.

Click here for previous Lundberg Survey reports in CSP Daily News.

Lundberg Racks: Friday, May 2, 2014
  Branded Rack Gasoline Weekly Change Unbranded Rack Gasoline Weekly Change
East Coast 299.31 -6.55 296.91 -9.90
Midwest 295.87 -10.17 293.21 -10.57
Gulf Coast 287.06 -9.23 283.68 -9.29
Rockies 290.69 -2.36 290.78 -1.41
West Coast 316.72 -8.00 299.50 -22.44
U.S. Average 299.55 -8.23 293.53 -13.32
  Branded Rack Diesel Weekly Change Unbranded Rack Diesel Weekly Change
East Coast 309.65 -8.85 302.61 -9.91
Midwest 308.22 -11.24 306.63 -11.29
Gulf Coast 303.23 -9.68 300.66 -9.24
Rockies 330.07 -1.00 326.92 -1.58
West Coast 311.41 -7.47 305.87 -8.04
U.S. Average 308.99 -9.15 305.00 -9.13