CAMARILLO, Calif. -- Four bucks a gallon is here, leaving the margin on a gallon of regular-grade gasoline at less than one thin dime in half the cities surveyed in the most recentLundberg Survey of approximately 7,000 U.S. gas stations. In fact, in about a fourth of the metro areas in Lundberg's June 6 update, margin on regular is less than a nickel, and it is currently negative in six metro markets. And another squeeze is likely on the way.
Including all gasoline (midgrade and premium too, with their small but still important [image-nocss] market shares) that American motorists buy, the average gas price is $4.03/gallon. On June 6, Lundberg's national retail update shows that regular hit $3.9985, midgrade averaged $4.1171, and premium was $4.2314. Each of the grades bounced up about 21 cents from three weeks ago. The price is 89 cents per gallon above its year ago level.
It was crude oil, again, that caused the rise at the pump.
It certainly wasn't retail margins, which declined nearly half a cent on regular during the three-week period. The U.S. average margin is still healthy enough, but slightly below the calendar year averages of 2005, 2006 and 2007.
The six cities with negative margins on June 6 were Wichita, Las Vegas, Phoenix, Reno, Tulsa and Louisville. Those at less than a nickel include Sacramento, Los Angeles, Fresno, Tucson, San Diego, Billings, Honolulu, El Paso, Stockton and Salt Lake City.
Lundberg did note that negative average margins, and particularly high ones, too, are in large part the result of lag time between wholesale and retail, and the averages do not reflect individual retailers' margins.
Gasoline demand nationally is already in retreat (so far, just moderately) due to price. And crude's latest jump, eaten by refiners, will soon hit the streets if global market conditions don't reverse it. And refiners have even more pressure to regain gasoline margin for themselves. It adds up to a potentially painful squeeze for retailers between probable wholesale gasoline price hikes and already slack sales.
Which adds some insult to injury when a business in the motorist service sector warns gasoline retailers against gouging. It's insult to use a warning megaphone when most retailers are probably forced to raise retail price and don't want to, and injury to presume they will gouge their customers, something they have never been known for.
An auto club that in many decades past was cozily aligned with service stations through a vehicle towing service arrangement is now pontificating that "consumers should not be overcharged for gasoline simply because the oil markets reacted so strongly" [in the biggest-ever one-day crude oil price jump of close to $11 bbl. for WTI on the NYMEX between June 5 and June 6].
"This sets up retailers to appear as villains if they, in the normal cost pass-through from producer to refiner to marketer to retailer, are able to maintain or expand profit," said Trilby Lundberg, publisher of The Lundberg Letter. They are not exempt from the universal business requirement to price as high and competitively as demand allows, are not tax-exempt, nor do they have non-profit status.
But gasoline stations no longer have the auto repair and service role in the national fleet that they once did, and towing service is no longer typical of the U.S. station population. For its part, today the club has its other motorist services fish to fry, and meanwhile also has many high-tech competitors for towing service. Pity that the club's old towing service alliance with retail stations wasn't replaced by some equally powerful new reason to be loyal to the retail gasoline industry. Here are a few reasons to respect gasoline retailers: They supply fuel to club membership (and all motorists) efficiently at fair prices, with modern, attractive facilities, a wide array of goods and services, and continuously make convenience to motorists a science and an art—tested every day by the forces of consumer response. To discredit a competitive, successful industry or hinder its daily struggle for success does not equate to consumer advocacy.
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