The U.S. average retail price of regular-grade gasoline fell 4.0 cents in the past three weeks, to $3.9198, according to the most recent Lundberg Survey of U.S. fuel markets. But not only was this limited to geographically—for example, during that time span the average California pump price jumped 16.84 cents to $5.3351, heavily impacting the average—it was also a fast-fleeing moment because crude oil price hikes are translating to sizable wholesale gasoline price hits.
The near-month closing futures contract price of West Texas Intermediate (WTI) crude gyrated narrowly within the $79-$81-per-barrel range, until last week when the Saudi and Russian announcements that they would extend their respective oil production cuts through the end of the year pulled crude oil up a big notch. The September 8 price of WI was an elevated $87.51per barrel.
The $6.25-per-barrel increase during the three-week period is the equivalent of 14.9 cents per gallon (CPG). Lundberg’s weighted average wholesale regular grade price rose 5.18 cents during the period (and weighted tax inside gasoline grew by 0.45 cents), costing retailers a tough 9.53 cents in margin. The retail margin loss was a penny deeper for premium grade.
Refiners had themselves lost gasoline margin, suddenly paying more for crude and now adjusting where and when possible by hiking at the racks.
So oil producers, led by the high profile decisions of two mega-producers, gained at the expense of the U.S. downstream.
U.S. refiners will have to heed the call to attempt some margin recovery, so that even if oil prices don’t climb further short term, pump prices may quickly rise 5-8 cents as they reel from the latest punches.
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Trilby Lundberg is publisher of the Lundberg Survey of U.S. fuel markets. Lundberg Survey Inc. is based in Camarillo, California.