CAMARILLO, Calif. -- In the past three week, retail gasoline prices moved up one penny on average. The August 11 self-serve regular price was $3.0256, up 1.06 cents since July 21. It is another all-time record high price, but falls 13 cents/gallon short of the true all-time high (March 1981) in today's dollars, according to the most recent Lundberg Survey of approximately 7,000 U.S. gas stations.
The relatively stable retail price reflects the relatively stable crude price, which has hovered around $75 per barrel for the past three months. It also [image-nocss] reflects plentiful supply of both crude and product.
Such stability seems ironic after flashing news headlines, especially last week's headlines. Some world and U.S. events that affect oil and gasoline prices offset one another. A dramatic example is the partial shut-in of Alaska production, announced August 7, followed by news of the busted terrorist plot in London announced August 10. WTI on the NYMEX jumped more than $2 on August 7, but the following day, when the shut-in was smaller than feared and the market realized that high West Coast stocks could be drawn down and alternatives to North Slope crude obtained, the price retreated the better part of a dollar. WTI then sat unchanged, until August 10, when the market saw the foiled terrorist attempt to blow up as many as 10 airplanes could frighten oil demand and well puncture jet fuel demand, it lost $2.35 per barrel. WTI then regained slightly.
The impact of the current Alaska supply loss, amounting to only around a 0.25% of world supply, will probably culminate several days from now when West Coast stocks must be refilled to include alternative crudes from around the world. As those logistics and orders are already being confirmed, the Summer Driving Season's end is just three weeks away.
Fortunately, some knee-jerk analyst reactions to the news out of Alaska, predicting big street price hikes all over the West, which may have startled the California governor into ordering pump price monitoring to "ensure propriety," are so far proved unrealistic.
Retailers and their suppliers manifested propriety and then some. The day BP announced Prudhoe Bay would cease, the five West Coast state retail average price fell 0.26 cents. And the PADD 5 region was the only one in the country where overall retail prices dropped in the past three weeks.
Barring any true hit to oil or gasoline supply, gasoline prices are slated to fall, and heavily so. Lundberg data shows crashing racks, especially Friday, Aug. 11, the day it updated street prices nationally.
As retail margins, temporarily swollen by the timing of that crash, adjust to the new wholesale market, retail prices should retreat. The U.S. average retail margin gained about 10 cents. Some moderate retail price cuts just might shake gasoline demand growth out of its current doldrums. Something around 10 cents would spark that process, which might be followed by perhaps another dime for a total 20 cent retail drop from lower September demand, lower fall vapor pressure cap costs, and, if jet fuel demand reductions result in more gasoline output, an even more flush supply scene.
Always, the possibility of an event affecting oil or gasoline supply, and preventing those logical gasoline price cuts from happening, does exist. Happily, the BP supply curtailment is benign and small in comparison to the potential harm from hostile world oil producers and hurricanes.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.