CAMARILLO, Calif. -- The U.S. average regular-grade retail gasoline price gained 6.9 cents in the past two weeks, according to the most recent Lundberg Survey of approximately 7,000 U.S. gas stations. At $3.2625, it sets a new all-time high in real terms as well as nominal terms. This price beats the May 18, 2007, price of $3.1827, adjusted to $3.239, by 2.45 cents.
Some of the price hike comes from rising ethanol prices. As the heavy demand season develops, ethanol cost hikes will further tax the whole downstream system: more (mandated) ethanol at higher prices, more refining cost to [image-nocss] compensate for high vapor pressure, and more transportation of the incompatible stuff into previously ethanol-free markets.
It is too soon to tell whether the current retail price is cutting into gasoline demand, although it appears to have arrested growth. From The Wall Street Journal to CNBC, not to mention plenty of colorful news features featuring local consumer anecdotes, demand data have been misused and misreported.
Meanwhile retail margin, another victim of frequently poor reporting and anecdotes, fortunately is faring well: The March 21 regular-grade average retail margin sits at 11.21 cents. Year to date it is 11.31; calendar 2007 was 11.11, nearly exactly the same as calendar years 2006 and 2005—all of them handsome improvements over several prior years' running.
Refiners have finally gotten a taste of margin improvement themselves (keeping crude oil's very recent price cuts for themselves), and will need substantially more soon to incentivize higher run rates and heavy importation of needed foreign gallons. If upcoming gasoline demand growth proves stagnant or negative, the need for good margin in both refining and retailing will be pressing.
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