CAMARILLO, Calif. -- The U.S. average retail price of regular grade gasoline is now $2.3386, up 13.23 cents in the past two weeks. This follows a rise of 12.72 cents in the prior two week period. After a nine month long pump price crash, the price bottomed on January 23 and has since recovered nearly 26 cents, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.
That was also the end of a long-running attractive retail margin period.
Before mid-January, rack and dealer buying prices were on the move upward due to crude oil prices perking up. In early February, Lundberg expected a few more pennies per gallon from crude. Now, the gasoline market is contributing too, with spot, wholesale and prices on the upswing. Some of this new price pressure comes from traders eying the union labor strikes at several U.S. refineries. Some comes from refining output incidents, especially the February 18 explosion at ExxonMobil's Torrance, Calif., refinery, that injured four workers.
In Los Angeles, the country's biggest gasoline market, pump prices have jumped 35 cents on average. Jobbers and retailers received cost hits and quickly passed them through to motorists. Also in Southern California, refineries are beginning to offer the higher cost "summer blend" product to spot market buyers, due at the pump in that region on April 1.
Nationally, however, the gasoline supply is ample. Even the Torrance refinery has been supplying gasoline from stocks on hand since the incident. The country's refining capacity use rate is not low. Summer blend's higher costs have not yet hit the streets. And gasoline demand is jazzed on the still-low retail prices and improved employment.
Unless crude oil prices should move up dramatically or U.S. refineries suffer substantially lower gasoline output, then near term, pump price increases will probably be modest.
Retailers lost narrowly in the past two weeks as margin declined 0.21 cents per gallon to a mere 10.48 cents. In the February 20 snapshot, some markets has very skimpy retail margins, with a few in the red as wholesale hikes had not yet been translated to retail. At this point, it is reasonable to expect that any further wholesale price increases will be passed rapidly to the street.
Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.
Click here for previous Lundberg Survey reports in CSP Daily News.
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