Thanks Crude, Thanks RINs

Pump price slide: 15 cents in three weeks, 37 cents in nine weeks, Lundberg says

gas station

CAMARILLO, Calif. -- In the past three weeks, the U.S. average pump price fell 14.57 cents on regular grade gasoline, to $3.2171. This makes nine weeks of price cutting, for a total decline of 36.76 cents per gallon since Sept. 6, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.

Two other comparisons of today's price are also pro-motorist: The current price is a 32.83-cent discount to its year-ago point. And the current price is the lowest since Feb. 18, 2011, two-and-three-quarter years ago.

Three weeks ago, after six weeks of pump price cuts, it looked like it was over unless crude oil fell some more. It did, and that is the main reason that gasoline prices resumed dropping.

Although there are other contributors to the pump price drop, especially the lower value of RINs, overwhelmingly the most powerful was the drop in gasoline's raw material. For example, West Texas Intermediate dropped $6.21 bbl., or 14.78 cents gal. equivalent, during the same three weeks. This is even closer than penny for penny to what retail gasoline did.

The recent reduction of anxiety about Syria and Iran pushed crude oil prices down, along with stronger position of the dollar, but there is no obvious signpost directing where oil prices will go next. Assuming little change in the oil market, this may be the end of the retail gasoline price cutting.

Already there are some signs--such as unbranded rack in the West bouncing up a bit on Nov. 8 versus Nov. 7 and a hike in West Coast spot--that refiners are running out of price-cutting room. Refiner margin on gasoline may be overdo for an up-correction. And although the U.S. average retail margin gained some in these three weeks and is in the pink, there are some markets where retail margin is very narrow. About half of the markets have retail gasoline margin above 17 cents, but in a handful, they are well under a dime.

Retail diesel prices dropped 4.26 cents on average in the past three weeks. Nationally, wholesale diesel price cutting began on Nov. 1, and was sizable each day since then at dealer tankwagon (DTW), branded rack and unbranded rack. All three classes of trade dropped more than nine cents per gallon on Nov. 8 alone. As with gasoline on Nov. 8, there is a wide range in retail diesel margin around the country, from under 11 cents to above 50 cents.

Overall, from here if crude oil does not again lunge down, it would probably take a refiner or retailer margin sacrifice to see pump prices drop further. But neither are in sufficiently flush gasoline margin territory to indicate that they can.

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.