Pump Price Is Up a Dime, More Hikes Likely

Oil price push dovetailing with start of high gasoline demand season
Photograph: Shutterstock

With oil prices notably higher and March launching the seasonal exit of refining repairs and low gasoline demand, the national average retail price of regular-grade gasoline climbed 9.57 cents per gallon (CPG) higher in the past three weeks, according to the most recent Lundberg Survey of U.S. fuel markets. It is now $3.4640.

Premium grade rose a bit less, up 8.71, to a national average $4.1841. The U.S. pump price of regular has zoomed up 28.47 cents in the past nine weeks.

West Texas Intermediate reached its near-month futures market closing price high on March 1 at $79.97. The March 8 price was $78.01. On Feb. 2, five weeks ago, it closed $5.73 per barrel lower at $72.28. While a strong showing, this is not a spike as the price remains in the range of $70-$80 per barrel that it has resided in most of the time since Nov. 2022.

Still, latest developments, mostly in the Middle East, have altered market expectations in a way that suggests oil price strength will continue. Several country members of OPEC+, led by Saudi Arabia, have decided to extend latest oil output cuts through June. Russia agrees with this stance. And three Middle East war campaigns supported by Iran—the Houthis, Hamas and Hezbollah, are active elements in the recently high oil price levels.

Other developments including likely stronger petroleum demand in some key consuming nations including China and the U.S. than is conveyed by some institutions are also supporting oil prices.

Now we have the special milestone of March identifying changes in the U.S. gasoline market, all seasonal. U.S. refiners are exiting the doldrums of their low-capacity utilization period as most of their repair and maintenance projects are completed or nearing completion. Their aggregate capacity use rate is up 4.3 points to 84.9.

And March 8 launching Daylight Saving Time lets loose our gasoline demand climb toward its spring-summer peak as longer days and more clement weather promotes normalizing motor travel.

While spring-summer reformulation and demand’s seasonal up-curve do not themselves dictate gasoline price increases, when they are accompanied by price increases for the raw resource, crude oil, street price hikes are virtually certain.

Currently, while not short, U.S. gasoline stocks are not superbly flush.

March also opens the period of several weeks when around the country, refiners will be making higher-cost spring gasoline formulations beginning with a portion of Southern California where lower vapor pressure product is required at retail in April. Higher cost at wholesale will translate to retail at the various deadlines kick in around the country for retail consumption, mostly in May.

The indicators, from Middle East violence to OPEC policy to U.S. seasonal vapor pressure reduction and demand increases, are for continued retail gasoline price hikes.

Even U.S. downstream margins are factors that may soon support higher gasoline prices, as refiners’ recent gasoline margin recovery just a start toward more normal margin, and as retailers lost margin lately to the tune of 5.27 cents in the past five weeks. Retail margin now averages 30.21 cents on regular, quite inferior to what today’s gasoline business cost regime requires for survival.

Click here for previous Lundberg Survey reports in CSP Daily News.

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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