Fuel Margins Hit 7-Year High for January

Healthy 18.5 CPG a 39% increase over 2013

Samantha Oller, Senior Editor/Fuels, CSP

January 2013-2014 fuel margins
Source: Raymond James estimates & OPIS

NEW YORK -- The first weeks of 2014 were kind to fuel margins from many of the industry’s biggest, publically owned chains.

According to a recent research note by Raymond James & Associates, national gasoline margins hit a seven-year record high for the month of January 2014 for the chains it tracks. This includes Casey’s General Stores, CST Brands Inc., Murphy USA Inc., The Pantry Inc., Susser Holdings Corp. and TravelCenters of America, and fuel distributors Susser Petroleum and LeHigh Gas Partners.

For the month of January, margins averaged 18.5 cents per gallon (CPG) for regular unleaded, or 39% higher year over year, according to Raymond James’ analysis. This surpassed the three-year average by 34%, and was up 11% sequentially from December 2013.

Diesel margins for these firms rose an average of 9% year over year, or up 2.1 CPG, during the same five-week period, according to Raymond James. Despite this margin expansion, the analysts cautioned that it is too early for them to revise their March first-quarter-end estimates for the retailers, although trends “imply upside” for some, such as Casey’s, Susser Holdings, CST and Murphy USA. Raymond James estimates margins using futures contracts and data from Oil Price Information Services (OPIS).

“Across the group we continue to model a year-over-year and sequential decline in fuel margins,” the analysts stated for the year ending in December 2013.

For the December quarter-end of 2013, the Raymond James analysts are modeling a 15.0-CPG margin for CST, or off 27% year over year, and a 16.0-CPG for Susser Holdings, off 24%, “both of which reported fuels margins for Texas, but more importantly compare conservatively to the [year over year] change in margins for the state and nationally,” the analysts said.

At TravelCenters of America, analysts are estimating a 15.7-CPG margin, unchanged from year over year, and for Casey’s, Raymond James is modeling January quarter-end margins of 15.2 CPG, or up 1.4 CPG year over year, which includes a 1.0-CPG estimated lift from ethanol credits. The Pantry had reported a December quarter-end fuel margin of 11.8 CPG, beating Raymond James’ 10.5-CPG estimate.

Across all regions of the United States, gas margins surpassed year-ago levels for the five-week period ending Feb. 3, 2014, Raymond James found, and moved higher from December. The year-over-year improvement ranged from an increase of 31%--or up 1.4 CPG to reach 15.2 CPG in the Southeast--to a jump of 48% in Texas, or up 4.6 CPG to hit 14.2 CPG. In the Midwest, fuel margins rose 32%, or about 3.9 CPG, to reach 16.4 CPG.