CAMARILLO, Calif. -- The Feb. 24, 2017, national average pump price for regular grade was $2.3299, up 1.65 cents per gallon (CPG) from two weeks ago, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. The small rise came mostly from minor upticks in crude-oil and wholesale gasoline prices.
While neither of the U.S. downstream petroleum sectors are in the pink as to gasoline margin, retailers are taking a beating. They failed again to pass through the wholesale price hikes to consumers, so their margin narrowed even more. The U.S. average retail margin on regular is a mere 11.82 CPG. In nearly one-quarter of the markets surveyed on Feb. 24, retail margin on regular grade was below a nickel, and in a few cities margin was in the red.
Since gasoline supply is long and demand is short, it has been a struggle for the downstream to increase prices. Demand is still barely climbing out of its January trough along the annual curve. Winter weather has been severe, and the pump-price premium over the year-ago point is now a bloated 56.13 CPG, all during sluggish economic conditions. Refiners have a tough climb ahead to achieve attractive gasoline margins, and for retailers it is worse. Their margin has not been this poor since late August 2016.
Even if crude-oil prices do not edge up further soon, retail gasoline prices probably will. A few pennies more at the pump devoted to margin won't get retailers in a better position, let alone cover mounting costs on many fronts that are hiking their bills, but it will stop the bleeding. Over many weeks as higher-cost, lower-vapor pressure product kicks in for the May 1 refinery gate deadline that applies in most of the nation, refiners under the gun of the Environmental Protection Agency (EPA) will, perforce, hike wholesale gasoline prices. Station owners and operators will by then either have already recovered precious pennies in gasoline margin or be forced to implement sudden and steep street-price hikes to stay in business.
Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.
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