Pump Price Up a Dime

But crude impact minor, gasoline margin on mend, says Lundberg

CAMARILLO, Calif. -- The U.S. average retail price of regular grade gasoline rose 9.87 cents per gallon in the past two weeks, to $3.5098. It is up 21.54 cents in the past month, and is the highest since late September, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.

Although crude oil trumps all as gasoline price leader, it was not crude oil in this two week period that brought the pump price up nearly a dime. Two main benchmark grades, WTI and Brent, did not freak out on Ukraine. WTI did bleat briefly during the two weeks, but ended close to the price of two weeks earlier; and Brent, a better measure of Ukraine's impact on oil, actually retreated.

Ethanol seems to have cared more about Ukraine than crude did, since Feb. 21, with its prices rising in part because Ukraine is a corn exporter.

Two other factors helped bring motorists this extra dime--refiner pass-through of earlier crude oil price rises, translating to a modest gasoline margin gain for refining--and also a modest gasoline margin recovery for retailers.

Retail margin expanded by nearly four cents per gallon but is still below 13 cents. During the first 10 weeks of 2013, retail margin was far superior to what it has been this year.

Daylight Saving Time has begun, incentivizing motorist demand with another hour of daylight for after-work errands. And, the current price is 23 cents below its year-ago point, another positive for demand.

Very near term, unless crude oils do jump high, we are unlikely to see more than a small further price hike at the pump. Spring gasoline prices cannot be known, but even if crude oil markets are calm, gasoline prices will be higher than they otherwise would be, thanks to seasonally building demand coinciding with the higher cost of gasoline from the mandated seasonal reductions of vapor pressure.

Gasoline supply is good, as is the refining capacity use rate. One reasonable scenario if crude oil prices don't skyrocket or crash: First a small further uptick feeding downstream gasoline margins, followed by relatively stable pump prices, then a steeper climb to a Spring peak.

Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.

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