The fire devastation in California and extreme winter weather in much of the United States will become more and more important to the nation's petroleum supply, demand and prices in coming weeks, according to the most recent Lundberg Survey of U.S. fuel markets.
Oil prices have jumped, especially late last week, for international as well as national reasons, but so far retail gasoline has not followed.
The national average retail price of regular grade gasoline edged up a single penny in the past three weeks, to $3.1355 per gallon.
West Texas Intermediate (WTI) crude oil rose by $7.20 per barrel, to $76.56, in the same period. It had hovered around $70 per barrel during most of December. That jump of $7.20 equates to nearly 17 cents per gallon (CPG). Motorists were shielded from that hit by refiners failing to pass through their suddenly higher buying costs.
U.S. refiner margins on gasoline were already low; now, they are too low to be sustained, and refiners will soon have to attempt margin recovery.
The wholesale gasoline price rise was a mere 6.64 cents during the three weeks. Retailers have not yet passed this through to motorists, so they have suffered a decline of 5.92 CPG in margin on regular grade.
If extreme winter weather should cause damage to refineries and pipelines, supply interruption and price impact will come. Also looming, a demand surge for petroleum products (and equipment and most commodities) can be expected as California begins its painful recovery.
The outgoing administration imposed heavier sanctions upon Russian oil shipments and insurance companies, impacting supply and price. Buyers are scrambling for alternatives, creating more price pressure. Adding new unknowns will be potential new sanctions by the incoming administration and in particular crude oil supplies into the world pool from Iran may be curtailed. Possible U.S. sanctions upon other oil producers after Jan. 20 such as Venezuela and Canada are also embedding themselves in the mind of the oil market.
If short-term retail price increases were a few pennies as refiners and retailers achieve at least partial recovery of gasoline margin losses were all to be considered, that would be tough going as usual for the U.S. downstream; however, the array of additional price pressures that may or may not be unleashed in coming months is wide and disturbing for industry and consumers alike.
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.
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