OPINIONFuels

Oil Just Doesn’t Know What’s Up

Pump price jumps 6 cents
gas station
Photograph: Shutterstock

The national average retail price of regular-grade gasoline moved up 5.92 cents per gallon (CPG) in the past two weeks, to $3.2422, according to the most recent Lundberg Survey of U.S. fuel markets.

We expected a turnaround after the 15-week price crash, amounting to an 81-CPG total cut that ended on January 19, with the tiny rise of 0.37 cents from the Jan. 5 price.

Premium grade rose as well, to $3.9202.

Now diesel prices at retail have also hit a no-change point, as gasoline did two weeks ago, with a small up-move of 0.35 cents, to an average $4.0536 in Lundberg’s metro-oriented diesel fuel survey. Probably diesel at retail will move up in price in the near future, barring big changes in crude oil prices or diesel fuel supply.

Oil prices are being battered into a vibrating state of anticipation whether up or down. Most of the potential changes are for oil price hikes. Much if not all of the big cost hits caused by Red Sea transit stoppage are already built in, but could later be deemed conservative if oil shippers’ inability to traverse that waterway due to Houthi attacks is seen as long term.

The Jan. 28 killing of three U.S. soldiers in Jordan has reportedly sparked 85 attacks by the United States on Iranian military and sponsored militia targets in Iraq and Syria in retaliation. So far, there is no Biden administration retaliatory move to attack Iran inside Iran. Meanwhile, some in the oil market expect softer oil prices due to a demand crash they fear may ensue if U.S. regional and small bank failures expand to major banks.

U.S. refiners, after running hot and high even into early winter, are now in full repair and maintenance season, in advance of spring demand increases. Recently, a high 92.6% of total refining capacity, they are now utilizing a more seasonally normal 82.9% of total U.S. capacity.

But supply is not tight, thanks to recent good building of gasoline stocks.

U.S. refiners also achieved a modest expansion of gasoline margin, into more survivable but not flush territory. As for U.S. gasoline retailers, they have regained 0.91 CPG on regular after losing 4.17 cents in the two-week period. Margin on regular currently averages 35.47 CPG.

Motorists, meanwhile, are paying 33 CPG on average less than they paid a year ago.

If oil prices continue to be balanced on the tightrope of Middle East unknowables, we may see some small further pump price increases. If so, those small rises may or may not dovetail with cost rises weeks from now when refiners’ costs of making spring formula gasoline make their way to the pump—first in a pocket of Southern California, then during May-June for most of the country and June-July for the rest.

Margin contrast behind retail price similarity: Right now, the average retail price of regular grade in Atlanta is $3.2633, up 7.93 cents in two weeks. Margin: Thanks to a relative lag at wholesale, Atlanta retailers on average gained 5.03 cents in margin, now 40.35 cents.

Meanwhile in Baltimore, with a retail price of $3.1748, wholesale and retail hikes were closely matched and margin was eroded by 0.24 cents.

Margin on average is a skinny 17.39 cents.

Click here for previous Lundberg Survey reports in CSP Daily News.

Trilby Lundberg is publisher of the Lundberg Survey of U.S. fuel markets. Lundberg Survey Inc. is based in Camarillo, California.

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