CAMARILLO, Calif. -- Crude oil price cuts of the past few days suggest gasoline prices will be headed down, and fast, according to the most recent Lundberg Survey of approximately 7,000 U.S. gas stations.
Refiners are passing through oil price cuts to wholesalers (note: about 14 cents per gallon worth in the Midwest unbranded channel of trade between January 3 and January 5), who will be passing cuts to motorists. Retail margins are temporarily swollen in many markets around the country, but [image-nocss] won't last for long. Retail margin now averages about 18 cents on regular in both the Midwest and Gulf, for dealer/jobber/unbranded channels weighted and combined.
The latest U.S. average regular grade retail price, $2.3208, is up 2.77 cents over the past three weeks, but the pace is greatly slowed since the bottoming out point nine weeks ago, with barely any up moves at all in the usual bellwether regions of the Midwest and Gulf.
Plentiful gasoline and crude oil supplies are the root cause of comparative retail gasoline price stability, now and for the near futures. If oil prices stay around their latest level of $56.31 per barrel (West Texas Intermediate February futures contract), retail gasoline prices will easily lose 5 cents to 10 cents per gallon. But will they?
Two caveats: If a cold weather snap detonates heating oil demand, or if a faithful Organization of Petroleum Exporting Countries (OPEC) adheres fully to its vows of production cuts, these oil price cuts will be reversed and a pump price plunge will be prevented.
Neither of these two scenarios appear likely, since most weather forecasts are for continued warm Northeast weather, and even those OPEC members who have made their cuts can't be very happy transferring market share to non-OPEC producers who are expanding output. Of the two current unknowns, the weather is less predictable than OPEC.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.