CAMARILLO, Calif. — The national average retail price of regular-grade gasoline crept up 10.2 cents per gallon (CPG) during the three-week period of June 21 to July 12, according to the most recent Lundberg survey of U.S. fuel markets. The rise follows a 23.61-cent decline during the seven weeks between May 3, its recent peak point, and June 21.
The current national price, $2.8321, is some 11 cents under its year-ago point. This is a mild encouragement to gasoline demand, which nationally so far this year looks to have grown but just negligibly, and which now is beaten down by heavy rains in several states. Storm Barry is the latest extreme torrent to hit gasoline demand.
As I described in a previous column, several factors have pointed to a pump-price increase, including some hefty increases to state gasoline taxes. Of the several states upping their tax effective July 1, some were quite large gasoline-consuming states and their tax increases were whoppers. Illinois's uber-hefty hike was 19 CPG. California tax inside the retail price of gasoline was 5.6 CPG and Ohio's was 10.5 CPG. These and the other state tax increases hitting on July 1 account for some of this directional reversal in the U.S. pump-price trend. Many price factors come and go, but tax increases are near term, nearly certainly long term, and have a good chance at forever.
The rest of the gasoline price increase came from stronger crude-oil prices, as tensions with Iran continued to support oil and Storm Barry has caused shut-in U.S. oil production. But the latter, although reflecting well more than half of U.S. Gulf offshore oil output, is not a huge volume even of U.S. oil production, thoroughly dominated by booming inland shale oil extraction, let alone world oil supply.
As for gasoline supply from U.S. refineries, at this writing just one refinery, idled on a mandatory basis due to its locale, has been affected. A significant shortfall of gasoline supply due to Barry would ensue only if severe flooding of facilities should occur. Meanwhile, the U.S. refining sector is busy, now humming along at an impressive 94.7% capacity use rate.
In the July 12 snapshot, freezing retail and wholesale prices, taxes and margins in one moment, retailers lost 8.64 CPG in gasoline margin vs. three weeks ago. If not for that loss, the retail price increase would have been more dramatic. In the same three weeks, refiner margin on gasoline gained just about the same amount that the pump price rose, so that if not for that gain, the pump price would have been very small or nil. Retailers on July 12 garnered a mere 14.33 cents on regular grade, their margin slashed more than 19 cents during the past five weeks.
Houston is deeply troubled now: Retailers on average are suffering a negative margin—5.6 CPG in the red on July 12—as during the prior three weeks the all-buyers weighted wholesale price surged 29 cents while the average retail price crawled up less than a dime.
Near term, the aggregate effect of many crude-oil and gasoline price factors may bring a minor increase in the national average gasoline price, or even moderate decline—notwithstanding the many July 1 heavy state tax increases.
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.