Nationally, the retail price of regular-grade gasoline averages $3.3682, an increase of 12.6 cents higher than it was two weeks ago, according to the most recent Lundberg Survey of U.S. fuel markets. Since the average pump price bottomed six weeks ago on Jan. 5, the price is up 18.89 cents. There’s probably more to come in the near future.
Crude oil led the way, with the main U.S. benchmark grade strengthening $6.91 per barrel, closing at $79.19 on Feb. 16. In cents per gallon, that’s 16.45.
So if oil stays where it is for a bit, gasoline would inherit a few more pennies in passthrough. A significant retreat by oil seems unlikely at this point.
Uncertainties in the Middle East worsened, as Israel retaliated against Iran-backed Hezbollah in Lebanon, and says it will expand its territorial campaign against its other main Iran-backed opponent, Hamas, in Gaza. Also, three members of OPEC, especially Libya, are producing fewer barrels of oil due to internal problems of their own. In addition, the burgeoned costs of skirting the Red Seas as oil transit waterway carry huge cost increases to move oil to consuming nations, supporting prices, with no stop of attacks by Yemen’s Houthi group visible on the horizon.
Also the global oil market has with an increasing sense of concern about future supplies matching demand, largely because the Paris-based International Energy Agency (IEA) is pessimistic about petroleum demand thanks to transition to renewable energy sources which IEA advocates, but that view is not shared with OPEC and various oil industry participants who are warning about demand outstripping supply down the line. The oil market can’t escape the implication that from here, a healthy balance between oil supply and oil demand can’t be guaranteed by “green” politics or ideology.
The U.S. gasoline market has its own reasons for product price strength: The refining sector is fully in its seasonal maintenance and repair period, cutting its aggregate utilization rate of refining capacity further, to 80.5%. A chief contributor to the lower use rate is the Midwest’s biggest refinery, bp’s idled Whiting, Indiana, plant, where extensive work is predicted to take longer than earlier anticipated.
Example of Whiting’s huge effect on gasoline supply and price is the sudden retail price hike to Indianapolis motorists: In the past two weeks, the average retail price zoomed up nearly 44 cents per gallon (CPG).
Fortunately for retailers in this metro market, the average weighted wholesale gasoline price increase lagged that retail average, translating to a momentary rise of 25.55 CPG in the average retail margin on regular grade. It was slightly bigger for premium grade. Other Midwest markets where sudden retail jumps occurred include Chicago and Cleveland.
If the above and other oil and gasoline price factors converge and continue on these lines, some additional national price hikes at retail may converge with a new element: refiners’ cost hikes for making spring formulae, which will emerge in wholesale and retail gasoline prices over the next several weeks.
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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