On the eve of the Oct. 7 attack upon Israel, the West Texas Intermediate (WTI) near-month futures price closed at $82.79 per barrel. When the market reopened on Monday, it closed at $86.38, and for several days meandered up and down but mostly up to close at $89.37 on Oct. 19. It was a rise of $6.58, or about 16 cents per gallon (CPG).
But the U.S. average retail price of regular-grade gasoline plummeted by 19.08 cents between Oct. 6 and Oct. 20, according to the most recent Lundberg Survey of U.S. fuel markets.
In the second week following the attack its machinations concluded with a decline, to $80.51 a barrel on Nov. 3. The drop of 8.24 a barrel was worth 19.62 CPG. The average street price of gasoline, meanwhile, fell 13.47 CPG during the past two weeks.
So in the past month, gasoline first appeared to ignore oil, then follow it. Now that oil’s apparent “war premium” has been spent, one may say that it can now stabilize as to price; however, it is unknowable whether the fountainhead of the attack on Israel, which is Iran, will continue to be unaffected by the crisis. For now, its oil production and revenue picture is robust.
For gasoline, its recently lower retail prices—down 44.36 cents since Sept. 22 six weeks ago—and its price discount to a year ago—currently 34.74 cents—are nice incentives to demand. But gasoline demand waning with the season and specifically on Nov. 3 suffering the end of daylight saving time, and unable to thrive well during weak employment conditions, can easily offset those price incentives.
Within those unknowns and constraints, both parts of the U.S. downstream oil industry, refiners and retailers, achieved some gasoline margin improvements. The minimal amount of recovery for refiners was out-shined by a superior 3.55-CPG gain for retailers. U.S. average retail gasoline margin is currently 47.93 cents for regular, and 54.47 cents for premium.
Around the nation, there was broad contrast, with big retail margin shrinkage in Los Angeles (down 24.92 CPG to 84.08 cents) and losses in most of the West, while Indianapolis bounced up 33.86 cents to 87.73 cents, with a few more Midwest markets also recovering impressively.
Baltimore does not look good: An improvement of 5.20 CPG in regular-grade margin put it at just 19.34 cents on Nov. 3. Several weeks of margin failing to reach even 21 CPG is a hardship for Baltimore retailers experiencing sharp cost squeezes.
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, California.