West Texas Intermediate’s (WTI) near month futures price closed $3.78 per barrel lower on Oct. 25 versus that of Oct. 11, according to the most recent Lundberg Survey of U.S. fuel markets. The decline came largely from a puncturing of the supply risk premium, built into oil prices from Middle East threatened and actual warfare, to a somewhat subdued mania.
The intelligence leak of Israel’s retaliatory planning against Iran’s attacks may have caused the response to be more measured and limited. A higher supply risk premium may return with a vengeance at any time.
We note that since WTI’s bottoming out point one week ago on Oct. 18, when the price hit $69.22 per barrel, oil has reclaimed $2.56 per barrel.
Refiners suffered a big gasoline margin blow, so upward price pressures are building in the wholesale market.
For retailers it was a different story. Since Oct. 11, the U.S. weighted average wholesale price of regular-grade gasoline plunged 16.44 cents per gallon (CPG). The national average pump price of regular grade dropped 6.75 cents, to $3.1941 per gallon. Total tax on gasoline moved up over one penny (Georgia’s gasoline tax vacation ended).
What else happened since Oct. 11 was a nice retail margin boost of 8.41 CPG, to a comfier 41 cents. If not for the country’s retailers having gotten this nearly 7-cent improvement at least for now, the pump price cut would have been greater.
The retail gasoline price crash now amounts to 41.82 CPG since July 12, 15 weeks ago. With the fact that the current retail price sits 48.4 cents under what it was a year ago, and gasoline supply is quite tight but adequate to meet current demand, the market appears safe and sane except in the portions ravaged by two hurricanes.
Atlanta, with gasoline tax restored, exhibited margin stability with a slight gain of less than 1 cent. Current average margin of 42.25 cents on regular compares poorly to that of mid-September with close to 59 cents. In Los Angeles, a gain of 15.12 cents in margin exceeded the loss of 10.34 cents in the prior two-week period. Indianapolis retailers paid nearly 18 cents less at wholesale in the past two weeks, but the average pump price in this market dropped 33.4 cents, lifting close to 16 CPG in margin from their pockets.
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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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