CAMARILLO, Calif. -- Retail gasoline prices broke the all-time record level again, with the July 8 U.S. average self-service regular price hitting $2.3068, nearly 2 cents above the prior all time record three months ago April 8, and a rise of 9.59 cents in the two weeks since June 24, according to the latest Lundberg Survey of approximately 7,000 U.S. gas stations.
This nominal all time high price is still about 70 cents shy of the inflation-adjusted record price of March 1981.
The new record high price is brought by two other record highs: crude oil prices, still hovering around $60 per barrel, and gasoline demand, that in the month of June was an impressive 2.5% above that of June 2004.
So this is not just demand seasonality at work, although that is healthy, toosome 7% rise between the first month of this year and the month ending July 1demand is also growing above last year's, even at these record prices. Although demand is weaker than it would be at lower gasoline prices, it is strong because the strong U.S. economy makes these prices easier to absorb.
Concerns in some quarters that gasoline demand must be curbed in order to protect consumers from themselves need to be countered with this fact: that the economic hit consumers would get from arbitrarily making gasoline a lot less affordable would pose more economic dangers to the economy. Currently, record high gasoline prices are not too high for consumers, as evidenced by demand growth.
That strong gasoline demand will see to it that even if crude prices soften a bit in the short term, and even if wholesale gasoline prices drop, retail gasoline prices probably will notthat, and the fact that gasoline retailers again lost margin, having gotten wholesale price hikes that on average exceeded retail price hikes. Retailers will increasingly be pressed to attempt margin recovery, after weeks of margin erosion.
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