CAMARILLO, Calif. -- During the three weeks from May 18 to June 8, crude-oil prices were seriously eroded, due in part to discussion between the Organization of the Petroleum Exporting Countries (OPEC), Russia and some of their customers concerning a chance that OPEC oil output will be upped by 1 million barrels per day soon, and in part to continued ferocious U.S. oil production. Since May 18, West Texas Intermediate lost $5.54 per barrel, and since its May 21 peak, it is down $6.50.
Refiners passed through the bulk of their buying price discount into gasoline at the racks, keeping a bit to feed their own gasoline margin recovery. Retailers receiving the wholesale price cuts pocketed that relief and padded it a little: Regular-grade margin expanded by 8.61 cents per gallon (CPG) in the past three weeks, according to the most recent Lundberg Survey of U.S. fuel markets. Lundberg data show the U.S. class-weighted average wholesale price of regular dropped 6.91 cents, while the U.S. average pump price edged up 1.73 cents, to $3.0137 per gallon.
On June 8, retail margin was 21.81 CPG, a celebratory recovery from the dangerously low 9.55 cents retailers garnered on March 23. Current retail margin is nearly 6 cents better than year-to-date 2018 margins of 15.97 cents, and a notable relief after the insufficient average of just 12.62 CPG during the eight-week period of March 23 to May 18.
There are still a few markets with retail margin below 6 cents on June 8, including Salt Lake City and Phoenix. In the case of Houston, after weeks of margin woes, the price break at wholesale of more than 12 cents since May 18 finally allowed retail margin to bounce up from red ink to an average above 20 cents, as retailers hiked street prices by 8 cents.
A cloud in retailers' sky though is 2018's very weak gasoline demand environment, due in part to high pump prices. The current U.S. average retail price is nearly 62 cents higher than its year-ago point. From here, that weak demand is one reason that a degree of price cutting zeal at the racks and retail pumps is likely to take over—even if OPEC does not announce an official crude-oil production hike at its meeting less than two weeks from now.
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.