This first price slip of the year will probably not prove a pattern, because all indicators are for higher prices. Higher crude oil prices, higher gasoline demand (both seasonal and year-on-year), [image-nocss] the onset of seasonal vapor pressure caps adding to cost and recent margin shrinkage (for both refiners and retailers) combine to pull the pump price up. The evidence of price pressure is there in unbranded wholesale buying prices (up a dime in two weeks), branded rack (up six cents) and direct dealer prices (down only a penny)--with much of this hitting in just the past few days.
Rising demand, as motorists "see" the current price as $1.31 below the year ago level, is very welcome by refiners still suffering from big shut-in capacity and so many marketers and retailers still reeling from last year's gallonage destruction. Despite the still-poor economy, the scene is a modest "win-win" for the gasoline industry and consumers. Today's comparatively low retail gasoline price leaves plenty of room for price hikes from now higher crude, spring reformulation and margin recovery without sending demand back into hiding.
But, unless crude oil spikes, price hikes are not likely to be huge. If better economics beckon, refiners will be anxious to crack capacity usage back up, augmenting supply.
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