CAMARILLO, Calif. -- The U.S. average self-serve regular price leaped another 19.47 cents in the past two weeks, to a new record high price of $3.0684, according to the most recent Lundberg Survey of approximately 7,000 U.S. gas stations. This beats the August 11, 2006, record by 4.28 cents. It is six cents shy of the true all-time record price in March 1981 when the price of regular was $1.35 but $3.13 in today's dollars.
Lundberg rack and dealer buying price data and research predicted falling [image-nocss] retail before now, but in the past two weeks, one dozen more refining capacity reductions took place in the United States and around the world, further tightening the gasoline market. Some of the non-U.S. events were in merchant areas, inhibiting gasoline export volumes, but now with U.S. record-high prices, much bigger volumes of gasoline from offshore are expected.
Some 88 cents ago (in the U.S. average price since late January), there were normal pre-Spring refinery turnarounds in the works as well as catch-up repairs from the 2005 hurricane damage. These were followed by extensions of work projects, fires, explosions, utility company power losses (two of which were raccoon- and opossum-induced), lightening hitting a refinery and even a reported bombing of a refinery in Sri Lanka that can't have added to traders' confidence in world gasoline supply. In two gasoline exporting refining centers, Saudi Arabia and Singapore, there was downed capacity. The additional dozen events in the past two weeks alone arrested a price decline of two weeks ago and prevented its arrival on the street.
Price peaking and falling now seems assured. Assuming lower racks and steady crude prices, refinery margins are set to shrink while retail margins appear ready to expand in recovery from recent loss. Although the price storm is probably coming to an end, suppliers and retailers can now expect pellets of official heckling and threats to end price gauging that has not taken place.
As news media, politicians and others intimate sinister refiner culpability for months of gasoline supply tightness and propose solutions that would make it worse, the greatest solution is building mass offshore in the form of many new refineries under construction. The new U.S. record-high price will add further encouragement to such international construction.
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