CAMARILLO, Calif. -- The national average retail price of regular-grade gasoline dropped 5 cents per gallon in the past two weeks, to $2.5066, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. This makes a total drop of 18.83 cents since Hurricane Harvey's landfall day, Aug. 25.
That drop is 11.45 cents short of the price spike Harvey wrought between Aug. 25 and Sept. 8. Where's the rest?
Most of the 11 cents difference comes from somewhat higher crude-oil prices between Aug. 25 and now. A little comes from the fact that retail margin on gasoline recovered more than refiner margin on gasoline declined.
Between Oct. 6 and Oct. 20, refiners absorbed oil's higher cost, sacrificing gasoline margin. They appear keen to pursue sales, especially since many of them lacked sales during shutdowns due to flooding by Harvey.
As for retail margin, it has narrowed by more than 8 cents in the past month to 21.74 cents on regular-grade gasoline. While that level is not unattractive compared with recent norms, it is not basking on the sunny hill it sat on four weeks ago when it averaged 30.04 cents per gallon.
Where's retail margin's "missing" margin, one may facetiously ask?
Retail gasoline margin languished at an average 11.38 cents per gallon on Aug. 25. It has fared not much better than that since early July.
Despite the good efforts by the industry to communicate the realities of market recovery after a disaster, quite a few observers opine that consumers are owed the full difference, that "missing" 11 cents, between Harvey's price hit and industry's recovery, and they even suggest industry wrongdoing. While there is no near-horizon factor that would allow a prediction of a quick 11-cent drop, since both gasoline supply and distribution are now mostly normalized, pump prices may drop a bit more anyway sometime soon since November ushers in a strong kick down on demand.
Hurricane Harvey upped gasoline prices by flooding refineries, as output was diminished, while at the same time, it slashed oil prices by that same flooding and shut refineries could not take the crude.
If recent crude-oil price rises become stronger, they would likely offset the price-depressing seasonal gasoline demand drop-off and cause pump price increases. But oil prices do not seem poised for important rises any time soon. In fact, traders expect that a year from now, crude-oil prices will be lower than they are today.
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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