CAMARILLO, Calif. -- The U.S. average retail price of regular-grade gasoline slipped 1.38 cents per gallon (CPG) during the past two weeks to $2.3639 per gallon, according to the most recent Lundberg Survey of approximately 2,500 gas stations.
During the same period, crude-oil prices declined more than that. Refiners cut wholesale prices more than oil producers cut feedstock prices to them, costing refiners gasoline margin. Retailers, who received deep wholesale gasoline price cuts, passed through just a fraction on average. The result: On a U.S. average basis, the Jan. 20 retail gasoline margin regained nearly a dime, and it now basks in healthier territory of more than 23 CPG.
Crude oil remains the chief determinant of U.S. gasoline prices and their direction. In this period, a secondary cause of the gasoline price slippage is that January is the trough month for gasoline demand, and this January is worse than usual due to extreme weather inhibiting driving.
Chances are that retail gasoline price cuts may continue, at least in the short term. As for crude, prices are not far above what they were back in late October 2016. This is because the Organization of the Petroleum Exporting Countries’ (OPEC) efforts to keep its members and even partnering nonmembers such as Russia in compliance with supply cuts is like trying to herd cats.
Oil-producing nations may move in the same direction in terms of output levels for periods of time. But as individual countries seeking to fulfill their own petroleum wealth objectives, they do not have a strong herd mentality. Some OPEC members have been long deprived of output levels they had been counting on to rebalance their national budgets. So it is not possible to predict whether OPEC members and friends—let alone other producers not part of the cutback agreement—will reduce, leave the same or even raise oil production.
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.