The Supply vs. Demand War

Pump price up again but may not hold
Photograph: Shutterstock

CAMARILLO, Calif. — The national average retail price of regular-grade gasoline climbed 7.70 cents per gallon (CPG) in the past two weeks and is now $2.0506, according to the most recent Lundberg Survey of U.S. fuel markets. Combined with the prior three weeks, that's 12.35 CPG up from the bottoming out point on April 24.

As expected in our May 19 column, mid-May market dynamics continued. In these five weeks, higher crude oil prices account for most of that rise, with a lesser contribution from U.S. gasoline demand rising seasonally and from continued easing of lockdowns around the nation.  Again, retail gasoline prices rose substantially less than did crude.

The awful refining capacity utilization rate plus comparatively dismal refiner margins on gasoline are ugly for the processing sector. Retail gasoline margin shrank further, now sitting at just over 29 CPG on regular and under 32 CPG for pooled. Denver, Cheyenne and Houston stand out with very narrow regular-grade average margins, with many South and Gulf Coast markets in similar straits.

High levels of supply globally and domestically for crude oil and gasoline easily overwhelm demand. Extending current conditions into next month and beyond, it seems unlikely that gasoline demand will grow enough to nourish either refiners or retailers with acutely needed sales. Summer's rising demand curve and the continued easing of lockdowns are paltry gains compared with the destruction of demand from unemployment. Also maiming gasoline demand are the current curfews in dazed metro markets suffering the consequences of violent protests.

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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