The U.S. Gasoline Market Disaster

High margin no cure for retailers
Gas station
Photograph: Shutterstock

CAMARILLO, Calif. — The national average retail price of regular-grade gasoline has crashed a total of 51.81 cents per gallon (CPG) since Feb. 21 seven weeks ago. In the past two weeks, it retreated 14.42 cents. The April 10 price is $2.0141 per gallon, according to the most recent Lundberg Survey of U.S. fuel markets. 

To find a lower average pump price, we go back to early March 2016 when the price was $1.8419. It happens that back then, retail gasoline margin averaged 16.85 CPG.

Margin currently is a fantastic 72.50 cents. It did recede 6.83 cents in the past two weeks, but conditions will have to change appreciably for margin to come back to earth. Gasoline demand per U.S. Department of Energy data is about half of what it was last year at this time—thanks to COVID-19 and the economic lockdown conditions destroying motorist consumption and employment, gasoline demand's backbone. Gasoline retailers suffering this trauma have no choice but to seek margin on very few gallons sold. They are loath to close up shop and be remembered by "essential" motorists as having gone AWOL.

Sad Seattle, with the widest retail gasoline margin at just under $1.34 per gallon on regular grade, bucked the national trend of margin slippage as it gained an average 10 CPG in the past two weeks. Note to industry critics: The dramatically high Seattle retail gasoline margin is no party.

Even when much of the nation has been released from shelter-in-place orders, COVID-19's hit to employment will all but surely keep gasoline demand from exhibiting anything like its normal summer upswing.

And even if globally, petroleum markets awaken and demand shows signs of recovery, the U.S. gasoline market may not be able to follow. The latest plan by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to buoy price, with about 10 million barrels per day suppressed from production, is by some calculations a mere one-third of the current world surplus of supply vs. demand.

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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