Retail Gasoline Margins Hit Record for July

Falling wholesale prices pad retailers' profits, led by the Southeast

ST. PETERSBURG, Fla. -- July was a hot month for retail fuel margins, with the national average hitting record highs. This is according to research from Raymond James & Associates analysts, who noted that margins averaged 9.2 cents per gallon (CPG) above year-ago levels, or 53% up year-over-year. gasoline margins July record

National fuel margins averaged 26.8 CPG, or 77% above the three-year trailing average for the month of July, with the better profits aided by declining wholesale prices. (Raymond James estimates margins using futures contracts and OPIS data.)

Raymond James, St. Petersburg, Fla., expects most of the convenience retailers it covers to enjoy stronger profits for July—in particular, Casey’s General Stores, CST Brands, Murphy USA and The Pantry. Casey’s recently reported that its fuel margins rose above 15.8 CPG for July, while CST, Murphy USA and The Pantry all shared recently on earnings calls that their margins last month grew.

Retail margins for the five-week period ending Aug. 4, 2014, were 52% greater sequentially than June’s more modest profits, which were 24% below year-ago levels. National diesel margins for the same five-week period were up 12.3 CPG on average, or 56% higher year-over-year. Gasoline margins remained elevated at 20 CPG or higher levels throughout the month of July.

Raymond James projects a 6% or 0.9-CPG increase in margin for the third quarter year-over-year, assuming that margins would migrate back to historical averages for August and September.

The higher margins played out across many regions, according to Raymond James, as shared below.

The Southeast, home to The Pantry, saw the greatest percentage increase in regular gasoline margin, up 78% or 10.1 CPG year over year, and up 7.9 CPG sequentially from June to end at 23.1 CPG for the five weeks ending Aug. 4.

In Texas, where Susser Holdings and CST Brands are based, margins grew 60% or 8.0 CPG year over year, up 9.7 CPG sequentially from the month prior to reach 21.4 CPG.

In the Midwest, Casey’s General Stores and Murphy USA operated in an environment where margins grew 72% or 11.1 CPG, up 9.3 CPG sequentially from June to hit 26.5 CPG.

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