CAMARILLO, Calif. -- The U.S. average regular grade price at the pump dropped 17.32 cents to $2.8843 in the past two weeks. The average now sits 30 cents under the record high set 10 weeks ago, and 13 cents under the year-ago price, according to the most recent Lundberg Survey of approximately 7,000 U.S. gas stations. Expansion of gasoline supply, from refining capacity come-back and heavy imports, caused the drop.
The Midwest led the way, as the regional average street price downward-corrected [image-nocss] by 38 cents. Lundberg recorded drops of more than 50 cents per gallon on average in Milwaukee, Cleveland and Indianapolis.
Near term, stability of price in the nation overall appears more likely than another big drop or a rise.
Against a big drop: Refiners are paying more for crude, at least the U.S. light benchmark grade whose price was depressed from lack of refinery take, and world crude prices do not seem ready to stage any significant retreat. U.S. refining operations have not reached maximum. The summer driving season has another full month to go.
Against a rise: Separate from seasonality, gasoline demand growth has been quite modest thanks to price. The portion of refining capacity that has had to sit out the summer price party wants to join in. Retail margin gained again, and will probably slim down sometime soon to a more typical size under competitive street price pressure.
So far this year, the retail margin, calculated by volume weighting of buying prices of dealers, jobbers and private branders, is just over 11 cents per gallon on regular gradethe same as it was for 2006 and 2005. The current average regular grade is six cents better than that.
Click here to access a free download of the July 27, 2007, Lundberg Letter, Two Mega-Metros ComparedChicago Prices Soar on New Supply Crunch.
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