Fuels

Meager Margin Recovery

Wholesale prices follow oil’s bouncing ball

CAMARILLO, Calif. -- The national average pump price of regular-grade gasoline edged up 4.27 cents in the past three weeks, and retail margin on regular moved up 4.05 cents, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.

These are very similar amounts—did retailers simply pocket a gift from refiners? Surely not. Since Aug. 19, refiners have been paying gyrating crude-oil prices and finally managed to eke out a gasoline margin increase themselves. Retailers still are under heavy pressure, having now recovered only about one-quarter of the margin losses they suffered over several weeks. Retail margin on regular sat at 14.39 cents on Sept. 9. In the Lundberg Sept. 9 snapshot, margin around the country ranged between -2.70 cents to a fine 22.91 cents.

Take Reno, Nev. It may be littlest big gasoline-tax city in the world. It has one of the highest average regular-grade retail prices in the country at $2.6448 per gallon. A big reason: Tax inside that retail price totals 83.48 cents, the highest in the United States. The recent margin trend here is not pretty. Currently, Reno margin on regular is within four-hundredths of a cent of the U.S. margin. Margin is now 3.32 cents skinnier than it was on Aug. 19, as retailers on average increased street prices only about half the amount that their wholesale buying prices rose. This is after retail margin shrank 8.79 cents between Aug. 5 and Aug. 19, and after a loss of 4.92 cents between July 22 and Aug. 5.

In the five weeks since the U.S. average retail price trough on Aug. 5, the street price increase amounts to 4.82 cents. Upstream, oil prices swirl in multiple speculations as usual, with current excitement centered on whether the International Energy Forum in Algeria later this month will bring about a production freeze or supply cutback by OPEC and Russia.

But that and other up-talk about oil prices, including hurricane and storm season in the United States, have been outweighed by opposing influences. In fact, oil prices ended up lower at the end of these three weeks than they started. If they fall further and wholesale gasoline price cuts follow, retail margin may be replenished that way. Or if oil prices surge, street prices would likely shoot up. If crude-oil prices should sit inert, some further retail price rise from retail margin recovery should be apparent. It will happen, though, and probably soon.

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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