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A Bright Moment for Retail Margin

Pump prices drop, more on the way?

CAMARILLO, Calif. -- The national average retail price of regular-grade gasoline is now $2.5111. It is down 3.32 cents over two weeks and down 10.18 cents in the past month, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.

Most price indicators suggest more declines to come. The chief indicator is crude oil; the market does not seem poised for a price jump.

Secondarily, U.S. gasoline stocks are more than comfortable, and U.S. refiners' use of capacity is more than laudatory. In fact, U.S. refiners appear to have sacrificed gasoline margin in pursuit of sales, even taking into account recent price breaks on ethanol, which they must purchase to blend into gasoline.

Meanwhile, gasoline retailers regained 4.48 cents in regular-grade margin over two weeks, with the average margin now impressive at nearly 26 cents per gallon. It remains narrow in the 7- to 15-cent range in some East/Southeast markets, but extra-wide in others, such as higher than 50 cents in parts of the West.

Downstream give and take will likely occur soon, with retailers forfeiting some gasoline margin and refiners regaining a bit. If near-term wholesale gasoline price-cutting occurs as the industry enters its lowest gasoline-demand month, January, retailers on average may be able to pass it through to motorists.

Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries. Click here for previous Lundberg Survey reports in CSP Daily News.

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