Expert Insight: September a ‘Big Inning’ for Retailers

Published in CSP Daily News

GasBuddy market analysis anticipates an uneven October

By  Tom Kloza, Chief oil analyst

Photo by Scott Mitchell

GasBuddy's Tom Kloza anticipates an uneven October for gasoline retailers.

WALL, N.J. -- September provided an unusually uneven environment for fuel prices. The price of benchmark WTI crude was off by about $7 barrel from August, and the average pump price slipped less than $8 barrel (19 cents per gallon). Those modest moves underscored some violent downswings in spot and wholesale markets.

Spot prices for Gulf Coast reformulated gas, for example, lost 62.5 cents per gallon or a whopping $26.25 per barrel in September, and conventional blend plunged 46 cents per gallon (more than $19 per barrel). The smallest wholesale drops occurred on the West Coast, but even there, the spot erosion easily outpaced the nominal cost savings in crude.

Thanks to the lag between wholesale and retail, it’s easy to predict that October will bring the lowest street prices since early January 2013. GasBuddy has already documented sub-$3-per-gallon prices in 16 states, and that count should expand to more than 20 by Columbus Day.

In essence, the wider-than-normal margins that were enjoyed by refiners through the first six months of 2013 have been passed along to rack-to-retail marketers. September represented one of the “biggest innings” for gasoline retailers since 2008, with particularly brisk returns in New England, the West Coast and the Rockies.

One consequence of the uneven performance of gasoline prices across the country: The gap between the most attractively priced 5% of street prices and the “average” price has widened out beyond 20 cents per gallon in many markets. This sets up a showdown of sorts. Will major brands like BP and Shell (who have pushed product differentiation and loyalty programs) be able to maintain or increase volumes against the backdrop of competitive price offerings some 6% or 10% lower than branded retail quotes?

Some other points to ponder as the fourth quarter gets under way:

  • Will spot ethanol slide to the futures-implied $1.60-$1.75-gallon level and resurrect E85 interest?
  • Will U.S. crude oil prices slip back below the $100-per-barrel level that was largely achieved on Middle Eastern saber rattling?

Tom Kloza is chief oil analyst for GasBuddy.com. GasBuddy is the premiere source for real-time local gas prices. To download the GasBuddy mobile application for free, go to GasBuddy.com. Users save big money at the pump and can share price discoveries with fellow drivers.