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OPINIONFuels

The Pump Price Crash Has Crashed

Price up, retail margin up
Photograph: Shutterstock

CAMARILLO, Calif. -- The Jan. 25 national average retail price of regular-grade gasoline has bumped up 1.71 cents per gallon (CPG) since Jan. 11. The price is $2.3273, according to the most recent Lundberg Survey of U.S. fuel markets. The retail price has reversed directions at last. As expected two weeks ago, the long and deep price crash, lasting 14 weeks for a total drop of 64 CPG, finally came to an end.

The current retail price still feels low, though; it is about 62 cents lower than it was about three months ago, and it is a discount of 25.5 CPG under its year-ago point. U.S. gasoline demand seems ready to view it as low as well. Significant demand growth from here would favor refiners and retailers and show consumer resilience.

The small uptick in retail price came from higher crude-oil prices. Oil prices caused the retail price crash and they ended it. They have been recovering after their extremely steep crash that ended just before the end of last year and are up about $9 per barrel since then. In the past two weeks, the domestic benchmark moved up another $2, or the equivalent of a nickel per gallon. If the gasoline market cooperates, that would be perhaps another nickel jump at the pump very soon.

But there's a glut. "Ample" U.S. gasoline supply would be an understatement. The gasoline glut dampened wholesale gasoline price response to higher oil prices, and during the past two weeks, unbranded and branded racks declined nationally (by 1.4 cents and 1 cent, respectively). Weighted by all classes of trade, the U.S. average wholesale regular-grade price has fallen 0.75 CPG since Jan. 11, even as crude-oil prices climbed higher.

Refiner margin on gasoline is still awful; it narrowed again in the past two weeks. Too-small refinery gasoline margin would have already threatened survival for many if not for substantial compensation from diesel margin, which is higher due to its higher international demand.

That same gasoline supply glut did not directly hurt retailers at large, though: In the past two weeks, they recovered 2.49 CPG margin on regular grade of the whopping 15.8 CPG that they had forfeited in the three weeks between Dec. 21 and Jan. 11.

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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