April may see another $1 or more in price hikes if oil prices rise further instead of retreating.
The national average retail price of regular grade gasoline leaped a further 45.9 cents in the past two weeks. The current price is $4.058 per gallon—that’s 90 cents higher than it was one year ago.
From here, it is not unreasonable to expect the U.S. pump price to surge an additional $1.19 per gallon, reaching $5.25 per gallon in coming weeks.
The overwhelming cause is higher oil and refined product prices, four weeks into the Iran war, with global petroleum supply shortfalls becoming more acute. Continued stoppage of oil transport through the Strait of Hormuz and damage to petroleum and related facilities throughout the Middle East, plus shut-in oil production capacity such as Iraq is currently suffering, are creating great hardship globally.
A very small gasoline price rise contribution is coming from the ongoing shift to spring-summer reformulations designed to reduce the creation of smog, adding cost to refining.
Price projectionists around the world are redrawing their expectations continually, and the short- and medium-term pictures are for more price hikes. Even when a reduction of demand as consumers shrink from price is taken into account, an oil price of $150 per barrel is lower than the $200-plus per barrel expected by some banks and various industry experts.
A further oil price surge to $150 per barrel would simplistically add $1.19 per gallon to the price of gasoline. That would bring the gasoline price to $5.25 per gallon.
Measures taken in the U.S. and around the world are impressive and welcomed by consumers. This includes:
- The waiver of vapor pressure rules for E-85 and the Jones Act.
- Gasoline tax holidays like Georgia has enacted to last two months.
- Releases of volumes from the Strategic Petroleum Reserve by the U.S. and some other nations.
- Eased U.S. sanctions on Venezuelan and Russian oil at sea.
However, the combined volumes are small considering the global supply crisis.
Currently, U.S. downstream gasoline margins are in healthy territory.
Both refiners and retailers have gained gasoline margin, at least for now. U.S. gasoline retailers had been on a roller coaster ride as to margin, suffering a huge drop of 16.5 cents per gallon in the three weeks Feb. 16-March 8, but thereafter garnering 25.2 cents more in the past two weeks, achieving a margin of 43 cents per gallon on March 29.
Trilby Lundberg is publisher of the Lundberg Survey of U.S. fuel markets. Lundberg Survey Inc. is based in Camarillo, California.
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