A Moderate Price Impact, Waning Fast

U.S. gasoline moves less than a dime post-attack on Saudi Arabia
Photograph: Shutterstock

CAMARILLO, Calif. — The Sept. 14 attacks on Saudi Arabia's oil facilities grabbed world attention and yanked up oil prices. When the NYMEX opened on the following Monday, Sept. 16, the near-month West Texas Intermediate (WTI) prices closed $8.34 per barrel higher.

And that was the peak. WTI tumbled $3.56 per barrel the next day and the total drop since Sept. 16 is $6.99. The U.S. benchmark landed with a thud not far above where it started pre-attack. It is still slightly elevated as not each barrel of Saudi Arabia's oil production loss has been restored and since its oil processing capacity remains in limp mode.

WTI closing price on Sept. 27: $55.91 per barrel.

Here is what U.S. retail gasoline prices did: The national average climbed 9.57 cents per gallon (CPG) between Sept. 13 and Sept. 27, according to the most recent Lundberg survey of U.S. fuel markets. This is less than a dime, from an event that would have been practically unthinkable in years past, when the Organization of the Petroleum Exporting Countries’ (OPEC) role and U.S. oil production, among other petroleum market factors, were vastly different from now. The new average pump price: $2.7264. That price is lower than it was seven weeks ago. And it is nearly 18 cents below its year-ago point.

Considering that part of that nearly 10-cent retail price hike came from U.S. refining problems causing wholesale gasoline prices to shoot up, the geopolitical news out of the Middle East was of even less import in terms of U.S. gasoline: The refining sector is in annual maintenance mode, plus there are several unplanned outages, especially in California. The overall retail price hike in California over the past two weeks was more than three times the size of the national price hike.

From here, the pump price prospect is for decline. The post-attack crude-oil price retreat is not yet fully reflected at the retail gasoline level. U.S. supplies of both crude and gasoline are ample.

Refining projects are on route to completion, with current capacity use already at nearly 90%. Winter-blend gasoline is entering the nation's retail pool. Seasonal demand is of course in shrink mode.

U.S. refining margin on gasoline is being enhanced by the recent oil buying price discounting, at least for those whose operations are not curtailed because of repairs. Gasoline margin shrinkage for refiners may be on the way as idled portions of capacities come back up.

Retail gasoline margin, meanwhile, lost a tiny 0.30 CPG, hanging in there on average despite the wholesale price upheaval. Nationally it is 21.62 CPG. It has been narrowing for seven weeks, totaling 11 cents decline. And it's a stark time in some markets, notably Denver, where an improvement of less than a penny since Sept. 13 puts apparent regular-grade margin at 0.72 cents on Sept. 27. Los Angeles has a regular-grade margin of 12.59 cents. This may sound livable for some other locale, but here, due to many inflated costs, is urgently low.

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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