In the past two weeks, the U.S. average retail price of regular grade declined 13.7 cents per gallon to $3.874.
Although earlier crude oil price cuts enabled it, now oil prices are up a few pennies per gallon equivalent, and there are U.S. gasoline market developments that suggest gasoline has its own current impetus for a turnaround. A reasonable scenario is for the average pump price to rise 4 to 7 cents in coming days.
West Texas Intermediate's near-month futures contract price bottomed two weeks ago at $69.23 per barrel. The U.S.-Iran ceasefire agreement signed mid-June, accompanied by a waiver on sanctioned Iranian oil, gave confidence to the global oil market that a supply normalization process would proceed with increasing shipments traversing the Strait of Hormuz.
By July 10, that ceasefire and Memorandum of Understanding, with the Iran sanctions relief, was revoked by the U.S. Attacks from both sides resumed. WTI's price response has been modest, with an up-price movement of just $2.18 per barrel in the past two weeks. Still, oil's partial recovery amounts to the equivalent of 5.2 cents per gallon.
For its part, the U.S. gasoline market has tightened some: Stocks have shrunk instead of growing, refiners overall have cut the use rate of capacity a little and wholesale prices paid by jobbers and dealers are rising around the country due, in part, to some refining disruptions related to weather.
Power has been restored to Marathon's Detroit refinery. Refineries in various nations have been hurt, not only by weather but by earthquakes, in the case of Venezuela, and war, in the case of Russia. Barrels and gallons from the thousands of sources affected at any time by external events show the always present potential impact they have upon one another.
The national average unbranded rack price rose 5.42 cents since June 26 to $2.9422., especially in the past two days. The average Midwest unbranded rack moved up by 5.64 cents per gallon in the past two weeks to $2.7576, per Lundberg daily surveys.
Also pressuring U.S. pump prices is mounting pressure on gasoline retailers. Average retail margin has fallen again, this time a loss of 7.3 cents in the past two weeks for regular grade. Current retail margin of 32.3 cents, while not critically low, is uncomfortably below the rosier conditions of mid-June.
Many of the country's dealers and other retailers will be seeking margin recovery, when they can get it, now and in coming weeks. That factor alone is enough to bring about a price trend reversal at retail, either pausing or reversing the price-cutting that consumers have enjoyed for the past seven weeks.
Trilby Lundberg is publisher of the Lundberg Survey of U.S. fuel markets. Lundberg Survey Inc. is based in Camarillo, California.
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