The March 22 terrorist attack on Russia on top of other international events of recent weeks has added to oil price strength, thereby making gasoline’s upward trajectory even more likely to continue than it was before.
In the past two weeks, the U.S. average retail price of regular-grade gasoline rose by 13.94 cents, to $3.6034, according to the most recent Lundberg Survey of U.S. fuel markets. It has been climbing for 11 weeks—a total rise of 42.41 cents per gallon (CPG) since Jan. 5.
The top cause of higher gasoline prices is higher oil prices. The strong second reason is seasonal changes in the U.S. gasoline market, namely the demand curve and the added cost of compliance with spring-summer reformulation requirements to prevent smog in warmer months. With reasonably well performing gasoline demand and stocks of gasoline sitting low, this already spells price strength.
Although future oil prices are never knowable, the possibility of a big decline is now even less likely than it was early in the year. The OPEC+ decision to continue oil output cuts through June, the continuing attacks upon Israel from Hamas and Hezbollah, the Houthis’ attack campaign in the Red Sea, and the spreading view of a developing world oil supply deficit was the backdrop pre-March. The near-month closing price of West Texas Intermediate (WTI) crude oil on March 22 was $80.63 per barrel.
Ukraine’s many recent attacks on Russia’s refineries, with one occurring right after the U.S. asked Ukraine to cease those attacks, also put oil prices on notice. Now, heavy speculation on the identities of the March 22 attack, which reportedly killed 133 persons and injured at least 140 others, is further supporting oil prices.
Fortunately for U.S. consumers, our refineries have increased their aggregate utilization of total capacity by nearly three percentage points to 87.8%, on its way to far greater utilization for the peak driving season to come.
U.S. refiners’ margin on gasoline has improved, which is healthy for ongoing performance. But U.S. gasoline retailers have now lost a sizeable chunk of gasoline margin, a whole nickel in the past two weeks. While the weighted national wholesale price of regular grade rose 18.75 cents since May 8, retail followed at a distance. Retailers on March 22 are garnering a mere 25.2 CPG, too slim for business function over time.
The Houston market remains dire, with a tiny 3.5 CPG margin on regular according to our March 22 surveys, as wholesale and retail price increases moved nearly identically in the past two weeks. Chicago, meanwhile, saw a bloodbath as the mammoth wholesale price hike of 40.09 cents has not been passed through. The retail price increase averaged 19.84 cents, slashing margin by 21.79 cents. Chicago’s March 22 margin on regular of a mere 17.83 cents cannot stand.
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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