CAMARILLO, Calif. -- The Sept. 9 U.S. average retail price of regular-grade gasoline was $2.6949, having leaped 30.28 cents per gallon (CPG) since Aug. 25 when Hurricane Harvey made landfall, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. It sits 48.3 cents above its year-ago point. For perspective, it is also 82 cents below the annual average 2013 price, 68 cents under that of 2015, and far below averages of 2012 and 2011. But a price shock is still a price shock, causing big if fleeting destruction of demand.
Within this retail price surge was 12 CPG more gasoline margin in retailers' pockets, at least for the moment. The weighted wholesale price (all classes of trade pooled) did jump, but not as much as the retail price. It increased nearly 18 cents during the same two weeks. Retail margin is now 23.4 CPG on regular grade. A great deal of the temporary windfall would have had to come anyway soon, since margin was an unsustainable 11 cents two weeks ago.
Margin should have, arguably, swelled far more than that: Retail price hikes were suppressed by fear of government witch hunts as officials pursue violation of their antigouging laws. Dozens of states have vague rules in place to protect consumers while wielding threats of heavy fines and jail.
A Lundberg survey found that 12% of retailers would bag their pumps rather than risk accusation of gouging. All station operators are between the rock of rising wholesale prices and the hard place of "unconscionable" pump price hikes. When street prices are kept below free-market levels, panic-buying is encouraged, and this has added to the gasoline supply pressure already taking place due to storm-related evacuations. It was panic-buying that drained the Phoenix station population in 2003 as officials announced a fuel shortage and advised motorists to switch to bicycles.
Today, retailers, under their breaths, may say: "Sorry, I am not in awful straits. Sorry my gasoline margin has improved. It is not because of Harvey and Irma, really, please believe me." Some news media reports have fanned some of the flames, scaring retailers into pricing artificially low and running their stations dry or bagging up and closing up shop as if they were in fact already out of fuel.
The market is trying to work beautifully and is largely succeeding, despite government interference through wrongheaded if well-intended antigouging laws. Wholesale gasoline prices are already tumbling, refiner margin on gasoline is stupendous for those able to participate, refiner cost has been cut via emergency waiving of reformulation regulations, retailers recovered needed gasoline margin, and there is, in fact, no national fuel shortage.
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.