Retail Margin Still Pinched

Pump price jumps 18 cents on crude oil, West Coast refineries, says Lundberg

CAMARILLO, Calif. -- The February 24 U.S. average retail price of regular grade gasoline is $3.6917 per gallon, up 18.16 cents over the February 10 average, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. (It is the highest price since late July last year. The hike though is far smaller than the late February 2011 hike in response to the so-called Arab Spring.)

Crude oil moved up some $11 per barrel during the same two weeks, suggesting that if oil stays where it is, the retail price is owed a few more pennies on the upside.

Oil is up on market concerns about Iran, ranging from mere supply dislocation as Iran and Europe boycott one another, to fears that war could break out and threaten Middle East oil supply. In addition, oil is up as investors flock to oil away from weak EU and U.S. currencies.

World oil demand growth is also contributing to the oil price.

The gasoline market itself made a contribution to the pump price hike this time, due to West Coast refinery issues. Regional price hikes at the pump ranged between 29 cents and 48 cents between February 10 and February 24. West Coast gasoline supply tightness will soon be resolved either by refinery normalization or imports from outside the region or both. Overall, U.S. gasoline supply is flush, while demand is weak, indicating that a gasoline-driven price hike is not in the making.

Gasoline's price direction is in crude oil's hands.

Retail margin: Not looking good. The U.S. average on regular grade eked out a mere 0.61 cents per gallon comeback, to a bare 7.79 cents. Due to the varying wholesale price spikes hitting different locations and classes of trade, there are some retail pockets with massively negative retail margins as well as some temporarily spectacular ones. Retail margin can be just as volatile as price, a fact unappreciated by most observers--especially those in charge of looking for "price gougers" during times of rising prices. On average, retail prices could do with another nickel just for retailers to recover some recent margin losses.

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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