Crude Domination

Gasoline margin ends losing streak, for now
Photograph: Shutterstock

CAMARILLO, Calif. — Crude oil prices strengthened appreciably over some 10 weeks, and oil price power over gasoline overwhelmed two big gasoline price power factors, oversupply and reduced demand. So pump prices have been climbing even at this low point in the seasonal demand curve.

The national average retail price of regular grade gasoline jumped 10.19 cents per gallon (CPG) in the past two weeks, for a total price hike of 27.05 cents since Nov. 20, according to the most recent Lundberg Survey of U.S. fuel markets.

Retail gasoline margin's decline began two weeks earlier, and during the nine weeks between Nov. 6 and Jan. 8, totaled 10.35 cents.

Margin on Jan. 22 is 20.67 cents, a recovery of 2.73 CPG.

The weeks-long rise in retail price and drop in retail margin were similar to what the other half of the U.S. downstream industry, refiners, experienced: failure to pass through buying price increases, against the backdrop of gasoline demand damage. In the refiners' case though, a serious glut of gasoline supply persists despite the now lower total U.S. refining capacity after some gave up the ship. And product cost pass-through needs to incorporate the recently much higher cost of renewable identification numbers (RINs) attached to gasoline. U.S. refiner margin on gasoline, like retail margin, has finally exhibited some recovery because higher oil prices of the last two months of 2020 through early January were passed into wholesale gasoline.

Crude oil price hikes have paused for the past two weeks, and if they do not resume climbing, then further pump price increases near term should be far smaller than just seen.

With the bounce in margin for both refiners and retailers, the downstream has gotten a taste of normalcy. But it will not be easy to sustain because gasoline demand is having a very tough time eking out a path to freedom, handicapped by low employment, sluggish lifting of government lock downs, and now higher retail prices and the current measly 15-CPG discount to last year at this time.

Two retail margin roller coaster rides: Among margins published by Lundberg on Jan. 22, Charleston, S.C., stands out with a super low 8.01 cents on regular, having declined 8.9 cents in mid-December, gaining 3.4 cents by early January, and now losing a nickel. In the San Francisco Bay Area market, margin rose 4.2 cents in the past two weeks, but this was after losing 8.9 cents in the prior two weeks plus the nearly 11 cents lost during the prior two-week period. But meanwhile, Chicago's comparative margin stability appears exceptional: It has gently gyrated within a mere 0.6 CPG since Dec. 18.

  • Click here for previous Lundberg Survey reports in CSP Daily News.

Trilby Lundberg is publisher of the Lundberg Survey of U.S. fuel markets. Lundberg Survey Inc. is based in Camarillo, Calif.

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