CAMARILLO, Calif. -- The June 23 announcement by the International Energy Agency (IEA) that 60 million barrels of government oil stocks will be released in July--half by the United States from the Strategic Petroleum Reserve (SPR)--has fired up some projections in the press of crashing prices at the retail gasoline pump, said the Lundberg Survey.
That announcement did cause, or helped cause, the price of oil to drop about $4 per barrel between June 22 and June 23. If gasoline moved in lockstep with no regard for [image-nocss] refiner, jobber and retailer margins or changes in gasoline supply or demand, that oil price drop would be 9.5 cents per gallon, not 50 cents.
The price of crude had already dropped nearly $20 during several prior weeks prior to the IEA announcement for reasons that have not gone away.
Retail gasoline prices dropped 11.22 cents during the past two weeks, putting the average regular grade price at $3.6283 per gallon, according to Lundberg's most recent survey of approximately 2,500 U.S. gas stations. The price has plunged 37.15 cents since this year's peak seven weeks ago.
U.S. gasoline demand is down for the year reflecting severe underemployment. The retail price was probably going to drop another few cents anyway, perhaps 5 to 10 cents over the next couple of weeks. With the upcoming sales of crude from the SPR, crude prices may slip further, deepening the price drop at the retail pump to perhaps 20 cents.
But the degree of enthusiasm refiners will have on bidding for SPR crude isn't known, nor is whether the government will continue the offering past the month of July. To predict that crude oil prices will plunge further from here due to SPR sales, and push down retail gasoline accordingly, is speculation that could be applied in the opposite direction just as easily.
Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.
Click herefor previous Lundberg Survey reports in CSP Daily News.
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