Retailers Lost Margin Over Iran, Ethanol

Street prices should edge up, reflecting retail margin improvement, says Lundberg

CAMARILLO, Calif. -- The January 6 average retail price for regular grade is $3.3596, up 12.03 cents from three weeks ago, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. It is the first rise since mid-October. The cause is higher crude oil prices pulling up wholesale.

The Lundberg weighted average of DTW, branded and unbranded rack prices jumped 19.5 cents during the same period. So retailers lost nearly eight-cents-per-gallon margin on gasoline and are under pressure to attempt recovery.

The U.S. average margin on December 16, regular grade, was 19.33 cents; it is now just 11.28 cents. For perspective, the annual average retail regular grade margin last year was 15.44 cents and exhibited the usual volatility: a July 8 low of 3.6 cents and a May 20 high of 32.3 cents.

During the most recent three weeks, each region had margin losses and the deepest were in the Rockies, Gulf Coast and West. On January 6, cents-per-gallon margins were in these approximate quartiles: less than 5 cents, 5 to 10 cents, 11 to 14 cents and 15 to 25 cents.

Oil's climb reflects market awareness of Iran's threat to close the Strait of Hormuz among other factors. There is already talk, naturally, of the release of Strategic Petroleum Reserve barrels should Iran actually do so. In wholesale, an up factor was the cancellation of the ethanol tax subsidy after 33 years that finally took place on January 1.

Unless crude retreats suddenly by several dollars per barrel, street prices will probably edge up some more, hopefully reflecting retail margin improvement.

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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