CAMARILLO, Calif. -- The U.S. average retail price of regular grade gasoline plunged 20.75 cents per gallon in the past two weeks, to $3.5454, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. This was the biggest drop since early 2008, which was 21.91 cents (between Nov. 21 and Dec. 5 that year), when world petroleum demand crashed due to world recession.
The price decline over the past month has been 29 cents per gallon. In California, it has been an astounding 51 cents per gallon drop, with 49 cents of that coming in the past two weeks as supply problems continued to normalize and consumers shied away from price.
The U.S. decline comes from lower crude oil prices and weak gasoline demand. Demand was already following its seasonal down curve after August. Now, more retail price cutting can be expected if crude oil doesn't deliver a shock to the upside, thanks to deterioration in gasoline demand: Demand will take a hit from Daylight Saving Time having now ended; as storm Sandy kicked demand in the teeth; and as unimpressive economic growth and employment impose restraint.
Fortunately, there is retail margin wiggle room for such additional price cutting, at least according to our Nov. 2 snapshot: Margin shed a small three cents per gallon over the past two weeks to a still-attractive 25 cents per gallon on regular grade. Some of the widest margins are in the Western region as the latest wholesale gasoline price cuts continue making their way to street level.
In California and along the East Coast for such different reasons, recent suffering from supply issues is being replaced with suffering from lack of demand shared by consumers and marketers alike. In the East in Sandy's wake, recovery for both will be long and hard. For devastated East Coast markets, the saddest gasoline supply consequence of Sandy is a fearful retailer having to inhibit price so as not to unleash the wrath of anti-"gouging" laws -- as tanks are drained and myriad consumers are deprived of even a gallon. An old and tired rationing system has reared its head. Price watchdog agencies are hindering the healing, thanks to wrong-headed policies that vilify free market participants.
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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