CAMARILLO, Calif. — The U.S. average retail price of regular grade gasoline is now $5.0990, up a dizzying 38.56 cents per gallon (CPG) in the past three weeks, according to the most recent Lundberg Survey of U.S. fuel markets.
In one year, the pump price has surged $1.9713. It rocketed 86.38 cents higher just in the seven weeks since April 22.
But, using an average of the two dominant light crude oil benchmarks, West Texas Intermediate Crude (WTI) and Brent, the price of oil jumped far less, about 20 CPG equivalent. It is the tightness of the U.S. gasoline market that accounts for the rest of the pump price hike.
If not for weak U.S. gasoline demand, even surrounding the Memorial Day weekend, and weak during 2022 so far, gasoline prices would be higher.
Right now, a motorist must invest an extra $29.55 for a 15-gallon purchase versus that purchase a year ago. Demand destruction wielded by price is happening and more can be expected. Each purchase at current prices does damage to the motorist and what demand might have been.
If not for U.S. refiners running capacity at a nearing max rate of 94.2%, then gasoline prices would be higher. This use rate sounds sweeter than it is, because capacity itself is down, due to several refineries having closed in the past two years due to inferior economics and some converting to renewable diesel due to hefty government subsidy.
If not for retailer gasoline margin shrinkage in these three weeks, gasoline prices would be higher. Despite their rapid response at street level, retailers did not keep up with the volleys of wholesale price hikes paid to refiners, thus losing 6.61 CPG.
If not for Russia's recent oil production rise, U.S. gasoline prices would be higher. OPEC failed to produce its scheduled volume increase last month, but OPEC+ managed an output improvement, thanks largely to Russian barrels as hungry consumers China, India and others not sanctioning Russia took advantage of discounted rates. Russia's oil revenues are most robust, despite international punishment over its invasion of Ukraine. Overall, OPEC and friendly collaborators include many weak producers, especially Libya and Nigeria which lately suffered output losses.
From here short term, assuming no giant change in world oil prices, U.S. retail gasoline prices may well rise due to whatever degree retailers succeed in margin recovery.
At this time, U.S. refiners are swimming in robust gasoline margin with yet another improvement helping them; however, it behooves economists and more casual observers of the U.S. downstream petroleum industry to recognize that record inflation, wage and other business cost increases such as utilities and insurance, burden refiners, jobbers and retailers right along with end-users of the precious fuels they supply.
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, Calif.