CAMARILLO, Calif. -- During the past two weeks, crude oil prices rose $3.55 per barrel. The West Texas Intermediate (WTI) crude oil futures price closed at $100.96 on December 2. But instead of rising, pump prices dropped by 8.89 cents per gallon to a U.S. average $3.2918 for regular grade, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. This is entirely due to losses in refiner and retailer margins.
In the case of refiners, they are being battered by higher crude oil prices on the one hand and falling gasoline demand on the other. They are exporting important volumes of gasoline as well as other products, but the surplus persists. The surplus is what American motorists aren't consuming, thanks to severe damage to the work commute caused by bad economic conditions.
Retailers lost margin too during the past two weeks, as they passed through to consumers wholesale price cuts they received around mid-November. In a few markets, retail margin is abnormally thin, below a dime on regular. In about a quarter of metro areas though, margin still exceeds 20 cents per gallon.
Combined, the U.S. downstream lost more than 17 cents per gallon in gasoline margin since November 18.
Since this clearly can't continue for long, the down trend in retail gasoline prices, a total of nearly 18 cents over the past six weeks, will probably come to an end very soon. It would take either a substantial drop in crude oil prices or a significant improvement in underemployment to allow gasoline prices to keep falling. Gasoline demand can't be expected to rebound short-term, so that leaves crude oil to decide retail price's fate.
Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.
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