Full-Year 2017: Fuel Prices, Taxes, Margin All Up

Oil prices cost retailers another penny of margin

CAMARILLO, Calif. -- Gasoline retailers have lost another 0.8 cents per gallon (CPG) on regular-grade margin in the past two weeks, now suffering an unsustainably low average of 13.46 cents, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. The average pump price rose 4.40 cents, while the class-of-trade weighted wholesale price increased 5.18 cents.

U.S. refiners gained a sliver of gasoline margin, but they too are in the shade.

Recent crude-oil price increases are not yet fully manifested on the street. It's a tough time for downstreamers to boost price, with gasoline demand suppressed due to fewer daylight hours and inclement weather this time of year. If demand and price competition allow, retail price can be expected to climb a few pennies soon if oil prices are stable at their new levels.

Fortunately, the market is well supplied, despite the recent cutback in the use rate of total U.S. refining capacity. The use rate has just pulled back by 3.7 percentage points to 93%, likely due to a combination of recent extreme cold weather and the many weeks of robust operations after Hurricane Harvey that swelled supply. The current use rate is impressive vs. a year ago, 3.4 percentage points higher.

In full-year 2017, the all-grades-pooled wholesale gasoline price rose, tax rose and retail margin rose. The weighted wholesale price was 25.6 cents above that of 2016; the state-weighted tax (including sales taxes) increased 2.1 cents; and retail price swelled 28.36 cents. All three grades combined, retail margin managed to expand 0.66 CPG in 2017—to its all-time record high, 20.38 cents. Inarguably, it had to, thanks to the higher wholesale buying prices and ongoing rise of retail costs of doing business.

On Jan. 19, 2018, the pooled retail margin sat at a depressed 15.32 cents, with regular 1.46 CPG narrower. That's cold.

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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