CAMARILLO, Calif. — The U.S. average retail price of regular grade gasoline shot up 78.53 cents per gallon (CPG) in the past two weeks, according to the most recent Lundberg Survey of U.S. fuel markets. The new price, $4.4294 per gallon, beat the July 2008 all-time record high by 32 CPG. And the two-week price hike broke the all-time speed record too, amounting to an average of nearly 6 cents daily for the past 14 days.
Diesel fuel prices exploded even more, climbing $1.1770 a gallon to $5.2007. Retail gasoline costs $1.535 a gallon more than it did one year ago and diesel costs $2.112 a gallon more.
In the past nine weeks, the retail price of gasoline increased by $1.04 and diesel rose by $1.56.
World crude oil supply had already been tightening, and oil and refined product prices rising, for many months prior to Russia’s invasion of Ukraine, with related geopolitics just one of the supply and price inputs. Oil market response with sanctions and other moves against Russia culminated with the U.S. announcement on March 8 that its oil imports from Russia are banned. In addition to official actions, multiple contributors have made for a cascade of pressures on supply from Russia including private company decisions to cease operations in, and equipment sales to, that country. The many pressures have contributed to current high oil price levels and an extremely skittish market.
The fact that Russia is the world’s second biggest exporter of petroleum after Saudi Arabia, and that it is the big PLUS in OPEC+, was formerly dovish on price and now hawkish, and the hampered ability of several OPEC member nations to produce even the volumes they have pledged against the backdrop of U.S. oil production’s decline—paints the oil market into the corner it is in. It does not help that asking Saudi Arabia to up its output, if it can, may be akin to asking it to reward those who wish to reward its arch-rival, Iran.
Reasonable near-term fuel price projections can be made showing a pause in the price hikes, or a continuation of them, or an acceleration—but not for a substantial decline.
Meanwhile, U.S. downstream margins both widened during these two weeks of extreme retail price hikes—refiners modestly and retailers dramatically. Some of the past two weeks’ big retail margin expansion of 29.11 cents, that came courtesy of timing in wholesale price changes,
will probably soon be forfeited. It was a fine recovery, and then some, of the 25.6 CPG margin loss retailers suffered during the 12-week period Dec. 3-Feb. 25. Gasoline margin volatility will keep both refining and retailing sectors on the edge of their seats.
Gasoline demand damage from extreme retail price increases challenges the entire downstream. As a factor shaping demand, price is trumping eased lockdowns and restrictions, Daylight Saving Time and spring’s liberation of gasoline motorists. And it’s not just gasoline price: Indirectly, acute diesel price hikes, which are raising prices of all consumer goods, are soaking up some of the available funds that would otherwise be spent at gas stations.
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Trilby Lundberg is publisher of the Lundberg Survey of U.S. fuel markets. Lundberg Survey Inc. is based in Camarillo, Calif.