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OPINIONFuels

Gasoline Retailers Slice Off Margin, Hand It to Consumers

Market favoring motorists
Photograph: Shutterstock

CAMARILLO, Calif. — During the two weeks from Aug. 9 to Aug. 23, the drop in the national average retail price of regular-grade gasoline and the decline in the national average apparent retail margin on the same were within twenty-two hundredths of a penny of each other, according to the most recent Lundberg survey of U.S. fuel markets.

The pump price fell 8.36 cents per gallon (CPG) in the past two weeks; retail margin shrank 8.58 cents, even a tad more than the retail price did.

Gee whiz, was that coordinated? Of course not, but nevertheless the extreme proximity of the two declines is a nice bit of proof that station operators are not engaged in an attempt to damage their customers with meaningless, punitive price increases. Retail gasoline margin currently sits at 23.97 cents nationally, still arguably healthy but by no means bloated, especially considering that many ongoing costs of doing business have been shooting up.

Motorists are in a very good position as to gasoline price and supply. U.S. refineries are running at nearly 96% of aggregate capacity, and stocks are well more than sufficient to meet demand. Meanwhile, pump prices compare as low. Over the past six weeks, the price has declined 17.19 cents. The current U.S. average price of $2.6602 is 25 cents below its year-ago point.

Oil industry and economics press coverage speaks clearly about dangers to the world economy and therefore to oil demand and oil prices as resultant of escalating world trade tensions, especially between China and the United States. Press coverage also emphasizes possible oil price shocks to the upside due to supply tensions, especially between Iran and the United States.

Near month oil futures prices for U.S. main benchmark grade West Texas Intermediate (WTI) slipped a diminutive amount in the past two weeks, to just $54.17. WTI prices have remained comparatively stable. In these two weeks, the price range has been a rather narrow $2.97 per barrel from highest closing price to lowest.

The U.S. shale oil producing sector is now acknowledged worldwide as a "swing producer"; in the past, that term was used to describe Saudi Arabia far more than it is now.

Downstream of crude, the U.S. refining sector is also a world star performer. National capacity use rate is nearly 96%. Stocks are plentiful. As U.S. gasoline consumers have cause to applaud recent prices, U.S. refiners have cause to take a bow.

So current gasoline supply and price are highly favorable to end users; however, if the huge, uncoordinated, competitive U.S. retail gasoline sector did not accomplish street price-cutting when it can, there would be no show to applaud.

Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.

Click here for previous Lundberg Survey reports in CSP Daily News.

 

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