Pump Price Drop Ends

Retailers’ margin loss doesn’t

CAMARILLO, Calif. -- The nation’s gasoline retailers have been losing margin for seven weeks. Margin sits at barely more than one thin dime on Aug. 19, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.

The U.S. average retail price of regular-grade gasoline, after dropping nearly 21 cents from its June 3 peak through Aug. 5, has now inched up 0.55 cents per gallon.

The turnaround at the pump comes from crude, the price of which has surged about 16 cents per gallon equivalent since Aug. 5, most of it in the past week. With crude up about 16 cents and the pump price up about half a penny, where’s the rest of the oil price hike?

The downstream industry, refiners and retailers, has so far absorbed that hit.

U.S. refiners have passed through less than half of that to their wholesale accounts, so they lost gasoline margin. Retailers around the nation are receiving wholesale price increases in varying amounts via the various classes of trade, but have barely begun to react with street price increases, so they lost margin.

In some markets, the refiner response to higher oil prices has been robust, making the retail margin loss extra severe.

For example, Memphis, Tenn., passed through only about half the jump in the weighted wholesale price paid there; that market and several others in various regions of the country are momentarily suffering negative margin, manifesting the urgency to let retail prices reflect what crude oil has wrought. The timing is acutely bad in Tucson, Ariz., where retail price continued to drop on average while wholesale prices shot up, producing a deep plunge into the red on Aug. 19. In others, including several West Coast cities plus parts of the Rockies and even Midwest, margins remain elevated but the ground underneath is trembling.

PADD 2 unbranded rack hovered around $1.47 much of the time since Aug. 5, but since Aug. 16 has climbed 6 cents. One hint in the West is the Los Angeles spot price spiking more than 17 cents per gallon in the past week.

The average retail margin on regular grade is now a mere 10.32 cents per gallon. It is nearly 7 cents skinnier than it was two weeks ago, when it was an already thin 17.03 cents. Retail margin has been shrinking since June 17; the total loss since then is 16.25 cents—this while many costs of doing retail business have been marching higher.

Click here for previous Lundberg Survey reports in CSP Daily News.

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