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Refiners’ Supper Goes to Retailers

Pump price edges up, no more to come?

CAMARILLO, Calif. -- The U.S. average regular-grade retail gasoline price is up 3.35 cents per gallon (CPG) in the past two weeks, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. The Nov. 17 price of $2.6129 is 40.97 cents above its year-ago point.

This small rise makes a total increase of 10.63 cents since the crash of 18.83 cents that followed Hurricane Harvey flooding Gulf Coast plants. Most of these pennies are from slightly higher oil prices responding to the weaker U.S. dollar and a little from market recognition of weakening producers Venezuela and Iraq. From here, further price hikes are unlikely unless the Organization of the Petroleum Exporting Countries (OPEC) and collaborators deepen their output cuts or producing nations’ problems worsen.

As this column said here, oil futures don't suggest price strengthening. The U.S. gasoline supply/demand balance does not favor pump price hikes. Now the U.S. refining capacity use rate has grown again, superior to last year at this time. The normal winter demand hibernation favors lower price if crude oil allows, and has been deepened a bit by the current price being a 41-CPG premium over its year-ago point.

Refining margin on gasoline had been on the plush side from late summer to fall, but since Nov. 3 has faded greatly. The deeper wholesale gasoline price cutting late last week appeared accrued to margin recovery for retailers, at least for the moment.

By Nov. 17, average retail margin on regular grade had expanded by more than 15 cents to 28.5 CPG. But timing can be cruel: In Salt Lake City, the weighted average wholesale price of regular has moved up nearly 15 cents since Nov. 3, while the average retail price skidded down a further 6.42 cents—slicing off most of the margin, leaving it at a razor-thin 1.5 cents on Nov. 17. Retail margin in Newark, N.J., is not much better. Meanwhile, several Midwest markets are looking nearly as cheery as markets in the Northwest and Northern California in the Nov. 17 snapshot.

Price volatility never sleeps, and it is restive in California, where the retail price increase was double that of the nation in the past two weeks. But in the past single week, the Los Angeles spot price and statewide unbranded rack are each down more than 18 cents, branded rack is down some 12 cents, jobber-delivered dealer buying prices fell about 14 cents, and refiner-delivered dealer buying prices have already declined more than 8 cents.

Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries. Click here for previous Lundberg Survey reports in CSP Daily News.

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