OPINIONFuels

Pump Price a No-Change, May Drop From Here

Retailers forfeit gasoline margin, refiners gain
Photograph: Shutterstock

CAMARILLO, Calif. — On April 9, the U.S. average retail price of regular-grade gasoline is $2.9441, according to the most recent Lundberg Survey of U.S. fuel markets. On March 26, it was $2.9449. The 18-week-long price run-up did cease, after a clobbering 77 cents per gallon (CPG), as various up and down price factors worked to offset one another (click here to read Pump Price Run-Up Is Nearly Spent).

The main enabler was that crude oil prices were comparatively very stable. In fact, the main U.S. benchmark grade dropped in price during the period, the equivalent of nearly 4 CPG. Although the OPEC agreement to raise production next month amounts to very little oil, current oil prices are incentivizing for some U.S. shale oil producers, and the Suez Canal blockage did not morph into a significant supply event. The absence of oil supply issues allowed price stabilization.

U.S. motorists are paying 93.00 CPG more than they did one year ago, a heavy disincentive. Persistently deep unemployment, a degree of remaining economic restriction around the country, and price hikes on many consumer goods, along with the far higher pump prices, do not look good for spring/summer demand recovery.

At the same time, the U.S. refining sector has expanded capacity utilization to 84%, a robust rate considering weak demand and already rising gasoline stocks. Refiners not undergoing maintenance and repairs are operating with higher margin on gasoline—high enough that competition for sales may slash them in coming weeks, translating to lower wholesale selling prices than otherwise would be.

Retail gasoline margin, meanwhile, shrank because on average higher wholesale prices during the period were not passed through to the street. Margin on regular grade right now is 28.75 cents, down 3.42 cents since March 26. But fortunately for many, current margin is robust compared with the meager levels seen in most of 2021 to date.

The Phoenix market has ascended nicely in terms of margin: Between Feb. 19 and March 12, the weighted average wholesale price zoomed up 48.31 cents and margin skinnied from 24 cents to close to 19 cents, but was followed by a good expansion to nearly 34 cents. Now, average Phoenix margin has gained a tad more as wholesale price breaks were accompanied by a retail stop of 1.5 cents, allowing average margin to shine bright at 34.80 cents on April 9.

Nationally, despite the rollout of higher summer gasoline blend costs and the ongoing upticks in some costs of doing retail business, retail gasoline prices are more likely to continue stabilized or to decline rather than resume rising.

  • 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.

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