Whipsawed Retail Gasoline Margin Slips Again

On the bridge of seasons, a hunkering down for station operators?

CAMARILLO, Calif. -- The U.S. average retail price of regular-grade gasoline dropped 2.16 cents per gallon (CPG) in the past two weeks to $2.9052, according to the most recent Lundberg Survey of U.S. fuel markets. The small decline more than reversed its upward move during the prior two weeks. The current pump price is about one-third of a cent below its month-ago price.

Crude-oil prices have been moving in a rather narrow range in these two weeks, rising slightly but staying below prices of early summer. A proxy price of global light crudes is more than 6 CPG equivalent below what it was about three months ago. Some effect of reimposed Iran sanctions is built into the price, as is the continuation of Venezuela's self-destruction, supporting oil prices. Also supporting oil prices: the U.S. dollar's recent weakness vs. other currencies. Also built in is higher oil production by some producing nations.

If crude-oil prices, which always have the lion's share of the retail gasoline price pie, do not zoom up or crash down soon, then supply and demand within the U.S. gasoline market may be more apparent than usual in pump price movements. And supply is high, while demand is low.

Gasoline demand so far this year has been decidedly weak, with growth virtually zero. The consumer price penalty over last year, currently 51.3 CPG, is one of the contributors to lack of demand growth. And now seasonally, September brings lower gasoline demand, which will add a dampening price factor. Looking forward, by mid-September, U.S. refiners will have a bit of a cost break with the seasonal end of U.S. Environmental Protection Agency-mandated summer blend specifications. A further decline in the average retail gasoline price of a few pennies per gallon seems to be in the cards very soon, and maybe more than a few over coming weeks, if crude-oil prices allow.

Since Aug. 10, refiners have been unable to pass through modest oil price increases in their entirety, narrowing their gasoline margins.

Retailers lost gasoline margin too. Recent history: A loss of a dime on regular grade from July 13 to July 27, a gain of nearly that much by Aug. 10, and now a loss of 4.10 cents to a U.S. average regular-grade margin of 20.91 cents on Aug. 24. It’s not a celebratory margin, but it’s not acutely low historically. Late summer and early fall may manifest a period of hunkering down for gasoline marketers and station operators.

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.

Photo courtesy of Shutterstock 


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