CAMARILLO, Calif. -- Regular grade at retail is now $2.9961, or $3 bucks. The U.S. average shed 11.29 cents in the past two weeks; 19 cents ago, on May 18, the price hit its all-time high both nominally and adjusted for inflation, according to the most recent Lundberg Survey of approximately 7,000 U.S. gas stations.
In the past five weeks, imports have at last rushed in and are the chief reason for the retail price drop.
The second reason is that refiners and retailers [image-nocss] gave up sizeable chunks of gasoline margin. Two more minor factors chipped in: Some domestic barrels of capacity are back (from the severest pre-Summer season of repairs and maintenance ever), and gasoline demand growth appears to have suffered (from price).
Instead of further steep drops in price, gradual declines are more likely near term. Although there is more good news than bad in these latest days regarding domestic refining capacity use, suggesting that much more domestic supply should be imminent, there are impediments: one is that crude oil prices are stronger; the other is that gasoline demand will place the bar higher for refiners and importers with about 10 weeks of demand's greatest pressure on supply.
On retail margin: It has been notably volatile even on a U.S. average basis, swinging from less than three cents on regular in February to 14 cents in late April and back down to emaciation in May. Fortunately, if the first half of 2007 overall is a good indicator, this will be the third year in a row for double-digit retail regular grade margins, boding well for profits to feed store improvements and expansions.
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.