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Is Price at the Pump Peaking?

Retail gasoline rises 8 cents per gallon on crude, RVP specs

CAMARILLO, Calif. -- The U.S. average retail regular-grade gasoline price rose 7.52 cents per gallon (CPG) in the past two weeks, to $2.7364, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. Over six weeks, it is up 14.63 cents.

Most of the climb came from higher oil prices, and a bit of it from the normal ongoing rollout of higher-cost spring/summer specs, with some underlying price support from seasonal gasoline demand, which always grows following its pit month, January.

Now oil prices have retreated by more than 8 CPG equivalent, and if they don't climb back up again soon, this may be it for the pump price increase that is common to spring. From here, any further retail price increases are more likely than not to be small.

U.S. gasoline supply remains ample. Refiners are running capacity at 93%, having expanded 5 points since the end of March, and nearly 4 percentage points stronger than at this time last year. Meanwhile, gasoline demand growth in year-over-year terms remains modest.

In the U.S. downstream, both refiners and retailers gained gasoline margin in these two weeks, but year to date, each has attained lower gasoline margin than during full calendar year 2017. In fact, year to date in 2018, crude-oil prices, retail prices, wholesale prices and even tax (by a smidgeon) are above their 2017 average—while only refiner and retailer gasoline margins are not.

Gasoline retailers are notably skinny. Even with the gain of 4.29 cents for regular grade since March 23, margin averages a mere 13.84 cents. Salt Lake City is still gasoline-newsworthy and not in a good way: Motorists saw pump prices do another wild jump skyward, this time by nearly 29 cents. We note that regular-grade retail margin is 3.15 cents better than it was two weeks ago on April 6, because Salt Lake's retail price rises exceeded those of wholesale; however, it is still in the red—by a whopping 12.76 CPG. 

Meanwhile, poor San Francisco, with chronically towering pump prices thanks in large part to punitive taxes and state global-warming prevention fees, as well as the state reformulation and high costs of doing business, has regular-grade margin at close to 36 cents, a gain of a nickel—but this margin but may well be less than sufficient in the market's overall cost environment.

Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries. Click here for previous Lundberg Survey reports in CSP Daily News.

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