CAMARILLO, Calif. -- The national average gasoline pump price rose 6.95 cents per gallon (CPG) over the past two weeks to $2.6612, according to the most recent Lundberg Survey of about 2,500 U.S. gas stations.
It is not uncommon for retail gasoline price increases this time of year, due to the phasing in of higher-cost spring/summer blends that are completed by May 1 at wholesale and June 1 at retail for most of the country, and due to seasonal demand increases that are given quick kick up by daylight saving time. This pump price hike, however, came mostly not from those factors but from higher oil prices.
Crude-oil prices rose during these two weeks by close to $4 per barrel for West Texas Intermediate and $5 for Brent, on a variety of factors, including:
- A weaker U.S. dollar.
- Tensions about international trade on multiple fronts.
- Organization of the Petroleum Exporting Countries (OPEC) and their cooperators' likely decision to continue oil production cuts at their June meeting and possibly into 2019.
- The possible worsening of oil production performance in Venezuela and other countries.
- Optimism about world oil demand growth.
The retail gasoline price hike puts the price virtually back where it was six weeks ago.
U.S. refiners paying higher oil prices in recent days did pass through the hikes into wholesale gasoline, thereby restoring their gasoline margins to just about what they were six weeks ago. The weighted wholesale price of regular grade (all classes of trade combined) jumped more than 16 CPG between March 9 and March 23.
But retail price rose less than 7 cents in the same period, so margin was slashed in half—from nearly 19 cents on March 9 to just 9.55 cents now.
If oil prices do not retreat in the near future, then retail prices are likely to rise directly due to the oil price hike, and may dovetail approximately with upcoming cost hikes for refiners meeting their Reid vapor pressure (RVP) deadlines—all while the seasonal gasoline demand curve continues to take shape. Upshot: potentially 8-12 CPG at the pump over coming days.
The March 23 average retail regular-grade margin of less than a dime can't last for long. Within that average is a slew of markets where margin is on this date in the red, some very deeply so. And margins in another big bunch of cities are skinny indeed. Case: Positive but barely, Albuquerque retailers paid 24 CPG more at wholesale vs. two weeks prior, while the average retail price climbed a mere 14 cents. Margin had been 16 cents on March 9; most of it was wiped out by the rapid climb in wholesale gasoline. Regionally, the steepest and most widespread unbranded rack price hikes occurred in the Gulf Coast, up 20 CPG over the two weeks. Houston is one of the markets where March 23 margin on regular is painted red. Here, since March 9, pump prices rose 7.26 cents, while wholesale shot up 16 cents on average.
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.