CAMARILLO, Calif. -- After sliding down nearly 19 cents per gallon (CPG) during the seven weeks following Hurricane Harvey's landfall, the average regular-grade gasoline pump price rose 7.28 cents in the past two weeks, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.
The retail increase came from higher crude-oil prices and a combination of gasoline market price pulls. On the gasoline side, refining maintenance (largely what Harvey delayed via flooding of plants), plus Explorer pipeline work caused by a leak, was joined by higher Renewable Identification Number (RIN) prices and even a tax increase in one state, California.
Recent crude-oil price increases don't seem poised for an ongoing steep climb, though the futures market currently sees prices a year from now lower, not higher, despite supply security issues affecting troubled producers Iraq and Venezuela. And as always, higher oil prices send a message to production, including U.S. shale oil production, to flex muscle for future growth, which would in turn depress price.
Of course, refinery and pipeline work will eventually conclude, and the CPG influence of RINs is nonstatic. Of the main factors upping the pump price since Oct. 10, only the California tax increase, a 12-CPG hit effective Nov. 1, is a set amount residing in price.
There is no gasoline supply shortage, and the country's refining capacity utilization rate has edged up another notch. As for demand, it got a kick down on Nov. 3 by the loss of Daylight Saving Time that cuts into evening driving home after work, and demand from here will continue its seasonal retreat. And the U.S. average retail price is now about 32 cents above its year-ago point, putting a drag on demand growth performance, rendering it inferior to what it otherwise would be.
Meanwhile, that new 12 cents in California helped catapult state pump prices 41 cents above where they were a year ago, adding an inhibition to demand growth in a state that accounts for more than one-tenth of national gasoline consumption.
Retail margin on regular-grade gasoline is 17 cents poorer since the nice 30-CPG level of Sept. 22, as wholesale price increases, including some occurring on Nov. 3, have not appeared at street level. Margin sits at an insufficient 13.04 cents, and for this reason alone a few more pennies, but not dimes, at the pump are probably fast on the way—even as infrastructural repairs conclude and even if crude-oil prices do not continue to rise.
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.