A welcome retail gasoline price cut of nearly eight cents may prove to be fleeting.
The drop of 7.6 cents per gallon in the past two weeks puts the U.S. average at $4.141 for regular grade. It cheers motorists some, but is probably not enough to prevent painful demand shrinkage.
The drop may prove very fleeting. There remains big up-pressure on price in both the crude oil market and gasoline market.
Since before the start of the Iran war, the average retail price has shot up by $1.12 per gallon, and it is 88 cents higher than it was a year ago.
Lower crude oil prices are the main reason for the recent decline, aided in small part by some policy decisions. Oil prices have changed direction repeatedly during recent efforts to resume peak talks between the U.S. and Iran. Equipment and vehicles in mediator nation Pakistan are being packed up for return to the U.S. The U.S. team is unclear as to who, in Iran, is in charge because of conflicting official statements.
U.S. policy changes designed to alleviate high fuel prices include federal waivers of the Jones Act, now extended three months, and the temporary emergency fuel waiver allowing nationwide sales of E15 ahead of the summer driving season. Although the higher ethanol blend cuts cost, it imposes air quality and miles-per gallon penalties.
Indiana and Georgia have suspended their gasoline taxes.
The stoppage of oil transiting the Stair of Hormuz and damage to energy facilities and energy production in many nations of the Middle East, on top of damage to facilities from the Russia-Ukraine war, have prompted policy changes around the world including rationing of fuel.
During these two weeks, Lundberg's national average wholesale regular grade gasoline price dropped 16.5 cents per gallon, enabling retailers to remain 8.5 cents in margin, at least for now.
Current retail margin is 31.4 cents, a level now toward normalcy but a far cry below the 43 cents garnered back on March 23.
U.S. gasoline market under pressure
In addition to oil price pressures, the gasoline market in the U.S. is under mounting pressures promoting higher prices. Gasoline stocks are substantially lower, and the seasonal climb to peak spring-summer gasoline demand is underway.
Unbranded rack for regular grade climbed 38.33 cents per gallon during the past two weeks, to $3.45; branded rose by 37.35 cents to $3.5066.
Jobber-supplied dealer buying prices jumped 39.27 cents, to $3.6881 on average, Lundberg Survey found. In West Coast markets, unbranded rack hit $4.2509, up by 47.53 cents per gallon since April 10.
Trilby Lundberg is publisher of the Lundberg Survey of U.S. fuel markets. Lundberg Survey Inc. is based in Camarillo, California.
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