CAMARILLO, Calif. -- After a total of 69 cents rise so far this year, the average retail price of gasoline is peakingthat is, if no sudden threat to oil supply causes the price of the raw material to jump, according to the most recent Lundberg Survey of approximately 7,000 U.S. gas stations. In the past two weeks, self-serve regular increased 8.43 cents to $2.8773, a fraction of the big bump of more than 18 cents per gallon during the prior two-week period. The current price is within four cents of the year-ago average [image-nocss] price and 15 cents shy of the all-time record level set last August.
Extensive work projects at U.S. refineries continue, but the overall capacity use rate is recovering. Supply is also being fed by good volumes of gasoline imports, thanks to high U.S. prices.
There is evidence that the retail gasoline price turnaround is already here. In several large Midwest markets, retail prices are down. In all regions, unbranded rack prices are down in most markets and branded are also down in many locations, aided somewhat by ethanol's down price correction. The effect is trickling down to the street.
It's trickling rather than racing because some marketers have not yet gotten sizeable price cuts, and because those that have gotten cuts are enjoying good margins for the first time in many weeks and have to hang on to them as long as they can. Meanwhile refiners, those fortunate to be running at full capacity, will have some wiggle room in their currently wide margin to cut rack prices, while those who have been hobbled by idled capacity will have less.
The competition for summer gasoline sales will bless and afflict as it always does, with 2007 lined up to be hot. Setting aside the big crude oil price caveat, three current potentials may combine for some steep retail price cuts: rapid normalization of refining operations; continued arrival of large gasoline imports volumes; and the cashing in of some margin chips by both refiners and retailers.
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