CAMARILLO, Calif. -- The Oct. 19 national average retail price of regular-grade gasoline was $2.9230 per gallon, 4.70 cents lower than it was on Oct. 5. And on this date the national average retail margin on regular was 28.11 cents per gallon (CPG), 9.61 cents wider, according to the most recent Lundberg Survey of U.S. fuel markets.
It is fortuitous that the extreme downstream, that is, gasoline retailers and their motorist customers, should get these breaks—because year-to-date and latest gasoline demand data are nothing to celebrate. Demand is stuck and will be lucky to register a portion of 1% in growth over 2017 demand.
For their part, U.S. refiners have lost again in terms of gasoline margin, losing about 3 cents more in these two weeks for a total deprivation of nearly 15 CPG since mid-August. They got a big oil-buying price break during the Oct. 5-19 period, as the prices of two prominent light grades fell more than 12 CPG equivalent on average. But refiners passed that and more through to their jobbers and other accounts, tightening their belts once again.
The waning of U.S. gasoline demand growth this year is one reason refining margins have skinnied. When eventually, probably soon, refiners are afforded some gasoline margin relief, it may seem to come at the expense of retailers, who at the moment are sitting on their highest average margin in months and may end up giving up some of their recent gain.
Oil prices appear to already contain a sizable supply risk factor from the now-imminent Iran sanctions. World oil markets are adjusting as flows are altered and relationships among buyers and sellers are changed in advance of the Nov. 4 implementation date. Meanwhile, three big producers—the United States, Saudi Arabia and Russia—are providing supply vigorously, and seem to be more than offsetting a degree of early curtailment of Iranian oil plus Libya and Venezuela's output shortfalls, in the apparent perception of world oil markets.
Near term, if oil prices hold at current levels, assuming no negative event affecting U.S. gasoline supply, and considering that the seasonally higher allowable vapor pressure is already in effect in all gasoline except a portion of Southern California, then the national pump price may exhibit notable stability. It has in fact moved in a range narrower than 7 CPG for several months despite an onslaught of many dramatic events that could have spelled price spikes and crashes, but didn't.
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.