CAMARILLO, Calif. -- Retail gasoline prices shot up nearly 17 cents per gallon in the past two weeks, part of a 42-cent hike since February 24, according to the latest Lundberg Survey of approximately 7,000 U.S. gas stations. Self-serve regular now averages $2.6650, up 16.51 cents since March 24.
Of that 42-cent rise, just 10 to 11 cents per gallon equivalent, is from crude. The rest is from this year's changes from Environmental Protection Agency (EPA) and federal energy bill requirements [image-nocss] of refiners, as well as what suppliers have to do to be in compliance.
Assuming stable or slipping crude oil prices; that much of this year's much-higher cost of supplying finished product is now built in; that no serious interruption to refining capacity coming back online from extra-heavy repairs and maintenance; and that enough gasoline imports can jump the even bigger hurdle of this year's specifications to make up the gap between domestic supply and total demand, then retail gasoline prices could well stabilize now or very soon, and then decline.
But negative developments with any of those ifs could extend the retail price run-up.
For their part, retailers have lost about six cents of their margin, on average, in the past two weeks. If wholesale prices retreat soon, then retailers can recover some margin without having to bump up on the street. But there are currently some margins in red ink that must expand soon unless wholesale prices retreat quickly.
Gasoline demand is barely growing at all at these prices, but seasonally it will rise as it always does. Refiners and other suppliers are hard pressed to maximize supply, with a tight ethanol market and the accompanying tougher, costlier gasoline distribution logistics. Lackluster demand will keep prices below what they otherwise would be. It is a bitter irony that with retail prices some 37 cents above what they were a year ago, many consumers will be oblivious to the pain of retailers' tough street price competition.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.