The Pump Price Has Peaked

Lundberg: We may see retail gas price decline of 8 to 12 cents or more before Memorial Day

CAMARILLO, Calif. -- The oracle of gasoline prices, crude oil, crashed $12.06 during the last two days of last week, to $97.18 per barrel., according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. This has allowed the retail price of gasoline to peak, after rising 11.98 cents per gallon in Lundberg's twice-monthly survey updated May 6, at $4 per gallon. Lundberg spot checks around the country suggest the U.S. price got to $4.01 around May 4, and is already reacting to crude oil's decline.

Oil's [image-nocss] price drop means that we may easily see a retail gasoline price decline of 8 to 12 cents, or far more, before Memorial Day.

But that is if oil prices don't reverse and climb back up. Gasoline has crude as price oracle, long term at least, but crude oil has no one price oracle. The three main factors that drove oil prices up--world demand, a weaker dollar, and Middle East supply threats--have not been vanquished. It is not yet clear whether world demand, led by developing countries, is suffering any serious shrinkage from high prices. It is not clear whether the U.S. dollar's recent strengthening was just a blip in the longer-term weaker dollar that has supported crude. Libya's oil production has not been restored, and violent continues in other Middle East/North Africa nations.

The gasoline market is in decline, both as to demand (preliminary data say -2% during April), and price (for example, U.S. average unbranded down 21 cents since May 2, to $3.1893 on May 6).

At $4 per gallon, the retail price has peaked 11.25 under its July 2008 all-time high. At least for now.

Both retail and refiner margins ballooned dramatically in the past two weeks, improvements sorely needed by both sectors. It is unfortunate that at the same time, officialdom's witch-hunt of "gougers" and "manipulators" are on the loose as never before. Nine federal agencies plus scores of state taxpayer funded offices around the country are ready to act incredulous when U.S. retail gasoline not seem to instantly and precisely mirror the global crude oil market.

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

Click herefor previous Lundberg Survey columns in CSP Daily News.