Fuels

Retail Margin Rebound

Gasoline price slide continues
Photograph: Shutterstock

CAMARILLO, Calif. — Nationally, the regular-grade retail gasoline price averages $2.2218, registering a drop of 2.54 cents per gallon (CPG) from two weeks prior, according to the most recent Lundberg Survey of U.S. fuel markets. The decline that began on Sept. 11 has been gentle so far but is more likely than not to become steeper from here forward.

This price drop also occasioned a retail margin increase of 4.25 cents, bringing the national average to a healthier 29.26 cents. In the other downstream gasoline margin, that of refiners, it was a loss because their wholesale selling prices dropped more than did their crude oil buying prices. Unbranded rack fell on average 8.6 CPG nationally in the past two weeks and in the Gulf region the crash was close to twice that amount.

For retailers to have this bounce back in gasoline margin is fortuitous.

On top of myriad business costs that continue to rise, many of them also face the prospect of higher insurance rates thanks in part to damage wrought by social unrest.

Retail price weakness is not likely to be reversed by crude oil prices, for their part hemmed in by globally weak demand and heavy supply. Oil supply is being augmented as Libya's oil output recovery continues and may gain even more strength in coming weeks. Some European governments are reimposing curfews and lockdown measures for virus contagion avoidance, hurting demand for petroleum.

In the United States, unemployment and underemployment continue to weigh on gasoline price, and the normal seasonal demand curve down is being magnified in 2020. The end of Daylight Saving Time, which always kicks demand down a notch, comes next week. The sustained closure of many schools and the degrees of lockdown around the country may well dovetail into the Thanksgiving holiday. The holiday cuts demand, instead of raising it, because holiday driving trips interrupt the work commute with a period of parked unused vehicles. Thanksgiving 2020 will see big swaths of consumers unable to pay for any such discretionary tangent into travel and recreation.

Meanwhile, U.S. gasoline stocks are still overabundant.

Some refining capacity is idled from prior Hurricane Laura damage joined now by some idling for the Delta. Although refiners have decreased the utilization rate of capacity, which was a notable 4.2 points lower by mid-month, some of this decline had nothing to do with weather events but instead with the poor sales environment.

Perception of evolving U.S. national policy may play a more significant role in fuel prices in fall 2020 than normal, and if so, it may be a dramatic input to futures market prices—followed quickly in spot and rack channels—because of petro-political headlines.

Click here for previous Lundberg Survey reports in CSP Daily News.

Trilby Lundberg is publisher of the Lundberg Survey of U.S. fuel markets.

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