CAMARILLO, Calif. -- During the three-week period from June 17 to July 8, the U.S. average retail price of regular-grade gasoline dropped 7.29 cents. This marks a total decline of 7.98 cents per gallon (CPG) over five weeks, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. The June 3 price of $2.3722 was the peak, after a dramatic climb of 60.36 CPG since mid-February.
And there is probably more to come, even if crude-oil prices do not drop further. Brent and West Texas Intermediate declined moderately, having gyrated down, up and then down again since June 17.
Abundant U.S. supply of gasoline is bringing lower wholesale and retail gasoline prices. In fact, the latest rack price cuts last week were hitting the gasoline market prior to oil’s latest retreat.
Gasoline supply is more than a match for continuing year-on-year U.S. demand growth, with enough spare gallons to also supply foreign motorists via exports.
Because retail prices adjusted down on average more than wholesale prices did over the three-week period, retailers lost nearly a penny of operating margin. Shrinkage was most acute in several Midwest markets.
Meanwhile, in several Western markets, retailer margin expanded during the three-week window. It’s been a seesaw in Salt Lake City, with an average margin crash from 25 cents down to just 7.4 cents, because weighted average wholesale prices zoomed up nearly 11 cents while the retail sector was still cutting by 7 cents on the street. In the San Francisco Bay area, retail prices edged up while the weighted wholesale price edged down, expanding apparent margin to a commanding height of nearly 42 cents on July 8.
All markets combined, the U.S. average retail margin on regular is an attractive 25.67 CPG. Just five weeks ago, retailers on average were garnering a mere 13.5 cents. Year to date, retail margin is superior to that of 2015’s full year, while refiner margin is inferior to its full-year 2015 delta.
There is a good chance that retail margin shrinkage will continue near-term as the latest rack price cuts—unless they are reversed quickly—work their way through to the pump. Retail prices are more likely to keep falling than rising, even if oil prices stay the same.
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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