CAMARILLO, Calif. -- As 2006 fades into a memory, petroleum analyst Trilby Lundberg of The Lundberg Survey is raising a glass to toast retail gasoline margins. It's been another record year for retail regular-grade gasoline margin in 2006, the fourth running, and prospects for good business in 2007 are bright, she wrote in her yearend Lundberg Letter.
Similarly, Brian Milne, an expert in the crude oil and refined fuels industries and editor of the DTN MarketWire and OilSpot, said he expects [image-nocss] gasoline demand to continue to grow in 2007, even as fuel prices remain volatile.
Crude oil, gasoline and diesel fuel prices [will] remain volatile in 2007, but [are] unlikely to overtake record highs set in 2006, Milne said. Several factors, from rising stockpiles to commodity cycles, will impact pricing.
Other predictions by Milne include:
Despite talk by a number of elected officials, imports of crude oil and gasoline will remain strong in 2007. Demand for gasoline in the United States will continue to grow in 2007. Demand for diesel fuel will continue its growth trend in 2007, driven by the trucking industry and agriculture sector. Retail gasoline prices will hold above $2 per gallon (national average) for most/all of 2007. Prices could flirt with $3 per gallon late in the second quarter or early in the third quarter. Demand for ethanol will continue to rise in 2007 and thereafter due to the commodity's rising use as a gasoline component, supply availability will increase as well. Biodiesel demand in the United States will gain traction in 2007.Meanwhile, Lundberg, who placed the average margin for 2006 on a gallon of regular gasoline at 11.2 cents, said gross retail gasoline margin revenue for all grades of gasoline for the year ($16.5 billion) very nearly match 2005's record high of $16.6 billion, despite the continued decline of sales of premium and midgrade gasolines.
Higher prices have taken a toll on pooled retail gasoline margin by cutting into sales of higher octane grades, she said. In 2004, regular grade had 82% of sales, two points more than in 2003. In 2005, regular took 83.5% of the market. Preliminary Lundberg data for 2006 put regular grade's share at 85%.
Lundberg's analysis of the year (click the Download Now button below for the complete yearend Lundberg Letter) includes a look at the challenges gasoline retailers have faced, including credit-card interchange fees, big-box competition and anti-oil chanting in the press, but ultimately concludes that those issues have not stopped the retail sector's impressive performancethanks to innovation and commitment to customer satisfaction. The station population and revenue has grown in the past four years despite these challenges (and in spite of pessimistic predictions to the contrary).
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