CAMARILLO, Calif. -- The U.S. average retail price of regular-grade gasoline slumped by 14.41 cents per gallon in the past two weeks, thanks mostly to lower oil prices. The price, $1.9054 on January 22, is fully a seven-year low: It was a nickel lower, $1.8552, on January 23 of 2009, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.
At the same time, in terms of annual averages the retail margin on regular can be described as a seven-year high, with slight fluctuations during 2011 to 2013. The current snapshot puts margin at 24.64 cents. It was nearly 19 cents in 2015, nearly 18 cents in 2014, ranged between 12.44 and 14.45 back through 2011, and was below 11 cents per gallon in 2009.
While retail margin has been widening over the years, so are many costs that it must cover, especially government regulations and fees. Margin needs widening as retailers' costs cut deeper, and more of same is likely in 2016.
Right now in some markets, retail margin is in hostile territory, in single digits. Specific to January 22, Indianapolis regular-grade retail margin is a mere 4.44 cents per gallon as the weighted average wholesale price decline over the past two weeks was 20.43-cents-per gallon smaller than the average retail price decline, clearly unsustainable.
Also fleeting is the 60-cent margin on regular in Seattle on that same day, as weighted wholesale on regular grade fell by more than 19 cents, the average retail price dropped less than 16 cents. As recently as Dec. 18, Seattle margin was less than half its current width.
The national retail margin may bloom a little less rosy soon. The last two weeks' wholesale's drop exceeded that of retail, thereby padding margin, but from here, wholesale price upticks may ensue. U.S. refiners have not passed through into wholesale gasoline the oil price bump they got this past Friday. If oil prices retain their slight recovery, and especially if they recover further, wholesale gasoline prices should cease falling and rise a bit, pulling up retail prices--with retailer margin squeezed along the way.
Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.
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