Retail Price Up Another 11 Cents

Downstream gasoline margins recover, says Lundberg

Published in CSP Daily News

CAMARILLO, Calif. -- The March 23 retail price of regular-grade gasoline averages $3.9297, up 11.49 cents per gallon since March 9, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.

Instead of crude, the cause is normalized gasoline margins for both refiners and retailers.

Prices of both WTI and Brent, two good benchmarks, slipped slightly in the past two weeks, possibly thanks to Saudi Arabia's affirmations that its surplus production capacity of some 2.5-million barrels per day "is there to be used."

Thanks to crude oil prices taking a breather, refiner margins on gasoline recovered to healthier territory after sustained weeks of lows. Retail margin did the same, expanding to nearly 13 cents per gallon after being stuck in the 7-9 cent range for a month.

It may not be politically easy to "blame" higher prices on decent margin, but long term it is important for the downstream sectors of the oil business to affirm their need to recover margin when margin has been too narrow to sustain good business operations.

The U.S. gasoline market is in good shape as to industry margin and as to supply. Even demand may finally be making a bit of a comeback, especially after the recent switch to Daylight Saving Time that liberates motorists from the shorter days of winter that suppress driving.

If crude oil prices do not spike, pump prices will probably peak soon and may even already be doing so. The average retail price of regular grade in California has now dropped nearly a penny since March 9.

Although gasoline supply tightness isn't likely, if it did occur, then refiners would happily come to the rescue, because nearly 18% of total U.S. capacity is benched.

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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