CAMARILLO, Calif. -- Retail gasoline prices fell nearly two more cents since May 20, bringing the total decline to about 16 cents since the April 8 peak. This development came after a 50-cent hike from January through early April that was due to zooming oil prices and costly pre-spring refinery work and fuel reformulations, some of which get more costly as the months progress, according to the most recent Lundberg Survey of about 7,000 U.S. gas stations.
The rate of retail price decline has [image-nocss] now slowed greatly, mostly because during the three week period, crude oil prices headed back up. They did that on refiners' renewed demand for crude, to fulfill seasonal gasoline demand needs and to expand U.S. demand for distillates supported by strong economic growth. In particular, the demand for diesel for transportation and stationery use is enhanced, supporting higher crude oil prices.
Whether gasoline prices continue down depends chiefly on what crude oil prices do next. It is possible crude will not hold its current position of above $54 per barrel. If it does not, then combined with the ample gasoline supply picture, pump prices will probably slip further.
Retailers' margins took a beating in the past three weeks, and refiners took a worse one. Generally, higher crude oil prices didn't make it through to wholesale, and higher wholesale prices weren't fulfilled on the street. On a year-to-date basis, however, retailers' margins are very close to what they were throughout last year, while refiners' margins are off their 2004 level. Any near term crude oil, wholesale gasoline or retail gasoline declines will take place against the backdrop of pressure on both refiners and retailers to attempt to recover margin.
Retail gasoline prices remain about 12 cents higher than the year-ago level, and on a year-to-date basis, about 19 cents higher than the 2004 average. Even at today's prices, demand gasoline growth flinched, but did not halt.