CAMARILLO, Calif. -- For gasoline retailers, late November conditions aren’t too shabby.
On Nov. 18 vs. Nov. 4, they were able to eke out a 1.74-cent-per-gallon (CPG) margin improvement on regular grade, while handing a price cut of 5.81 CPG on average to motorists, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.
The new national average retail price for regular is $2.2032 per gallon.
In the same two weeks, crude-oil prices gained modestly, but U.S. refiners slashed wholesale rack and dealer gasoline prices anyway, eating into their own gasoline margins.
The gasoline market’s own inputs are why pump prices shed nearly 6 CPG while crude gained a bit. Demand is down seasonally, with last week’s loss of one hour of prime driving time punctuating that down curve as daylight saving time ended. Adding to that turnoff for gasoline demand is the persistent high numbers of nonworking and underemployed people at a time when the current pump price sits 6.49 cents above its year-ago point.
At the same time, U.S. refineries are cranking to the tune of 89.2% of total refining capacity, up four percentage points from two weeks ago, as seasonal repair and maintenance are winding down.
Clearly, despite crude oil’s small recent price bounce, refiners and retailers are zealously chasing gasoline sales. Refiners are making do with less, while retailers were able to pocket a portion of refiners’ wholesale gasoline price cuts and pass along the rest to motorists, on average. On Nov. 18, retail margin on regular was 25.02 cents. Year to date, 2016 is superior to every full-year retail margin in history.
If the Organization of the Petroleum Exporting Countries’ (OPEC) Nov. 30 meeting does not result in an agreement to freeze or reduce its combined oil output that convinces the oil market it means business, and if no sizable non-OPEC production drop cuts into world oil supply, then more but smaller cuts to the pump price may come. U.S. refiners currently lack the slack with which to cushion wholesale gasoline prices from any more oil price hikes.
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.