A Month of Pump-Price Stability

But downstream shorted both gasoline margin and demand growth

CAMARILLO, Calif. -- The U.S. average retail gasoline margin on regular grade on Sept. 21 was 17.71 cents per gallon (CPG), according to the most recent Lundberg Survey of U.S. fuel markets. It was 22.86 cents two weeks ago. Margin had gained 1.95 cents between Aug. 24 and Sept. 7—but the gain has been replaced with a loss of more than twice that amount.

The U.S. average wholesale regular-grade price, weighted by class of trade, jumped 4.57 cents in the past two weeks; instead of this being passed through to motorists, the retail price retreated 0.55 of a cent. In the prior two weeks, the retail price rose a tiny 0.27 of a cent.

Refiners lost gasoline margin too (again). As of Sept. 15, they are off the hook for the costlier summer-grade product, which eases some of their margin pain but may not translate to a break for their jobber and station operator accounts.

The U.S. average retail gasoline price has meandered mildly for a month, unlike its more decisive ups and downs during July and August. It seems likely that unless crude-oil prices make waves, retail gasoline prices will slip a few cents in coming days. It would come in part from the lower-cost winter product, permitted as of last week which will be making its way to street level. The lower-cost product (but not necessarily lower-price product, since the price of crude can trump all else) is flowing into a market still flush with supply. Meanwhile, downstreamers, both refiners and retailers, are laboring in a very iffy gasoline demand-growth scene.

Although crude-oil prices gained an average 6 CPG equivalent over the two weeks, the increase may not hold. A big U.S. stocks drop spooked the price last week, and the U.S. dollar's recent weakening helped support oil prices. But the dollar remains stronger than it was a year ago. And while some Organization of the Petroleum Exporting Countries (OPEC) producers including Iran and Venezuela have outputs that are weaker and which may weaken further, outputs from two nonmembers, Russia and the United States, are notably robust. And producers in general are incentivized by the recently higher oil prices.

Along with oil price direction being unclear, U.S. gasoline demand's direction is also unclear. After demand growth was virtually comatose in 2018 through June, now it seems to be showing signs of life. Still, it may not be easy for the downstream industry to regain recent gasoline margin losses let alone achieve margin improvements from there. Yet in coming weeks both refiners and retailers will need to seek gasoline margin recovery. In a few markets, the need for retail margin expansion is acute.

Margin is skinnier than a dime in several markets, including Denver; El Paso, Texas; Baton Rouge, La.; and Indianapolis. Albuquerque, N.M., has been pummeled to a negative 0.53-CPG margin in the Sept. 21 snapshot, on average, because a wholesale price jump of 7.01 cents was accompanied by a retail price drop of more than a penny since Sept. 7. So at Albuquerque stations on average, the regular-grade margin got slashed by 8.38 cents.

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.

Photo: Shutterstock


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