CAMARILLO, Calif. — Motorists are curtailed for lack of jobs, and those with a work commute are paying more at the pump. The national average price of regular grade is up 16.86 cents per gallon (CPG) in seven weeks, and up 8.88 cents in the past three, to $2.3479, according to the most recent Lundberg Survey of U.S. fuel markets.
Oil price increases are the clear driver of the higher gasoline prices, thanks in large part to OPEC's price-saving efforts, a degree of oil demand recovery in Asia, and the weaker U.S. dollar. Saving those producers still out of the game due to oil prices having crashed earlier this year, especially U.S. shale oil producers, world oil producers are now better off. Saudi Arabia has offered to slash its own output to help make some room for Russia's desired production increase, to help shore up price. The oil futures traders are betting on a bit more oil price strength next month.
U.S. refiner margin on gasoline remains in acutely low territory, despite a tiny improvement in these three weeks. U.S. refiners may well have to close up more capacity, as their higher oil buying costs are very tough to pass through into the glutted gasoline market. U.S. gasoline demand is sick, mostly from job losses and government curtailment of economic activity, so there's very little wiggle room.
Retail margin on gasoline was cut down another slice, a drop of 0.72 CPG to an insufficient 17.95 cents. Retail gasoline margin has lost 11.31 cents since late October. Margin on premium grade lost 1.23 cents, now just 31.95 CPG.
In the mammoth Los Angeles area, where margin is at the low end among West Coast markets, the weighted average wholesale price on regular jumped 16.69 cents since December 18 while the retail price trailed, up 11.6 cents—so retailers shed an average 5.58 cents in margin, now 26.61 cents, very low indeed for this high-cost market. Los Angeles margin is off by just over 12 cents since Dec. 4. Retailers will be scrambling to keep up, what with Los Angeles spot market prices climbing another 8 CPG in just the past week.
Refiners and retailers alike will be under heavy pressure to hike price. They don't want to promote any further demand shrinkage, but they will soon have to march quite closely to crude oil's drum or fall out of the parade.
- 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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