CAMARILLO, Calif. -- The Feb. 22 average retail price of regular grade gasoline is $3.7950 per gallon, up 20.32 cents from Feb. 8. It has been a nine-week run-up of nearly 54 cents per gallon, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. But retail price hikes are losing steam, and may cease altogether soon.
Peering up the supply chain, the number one factor is crude, and crude oil prices (both West Texas Intermediate [WTI] and Brent) are down, in part due to a stronger dollar.
U.S. refiner margin has expanded, and in the past very few days, refiners have been cutting wholesale prices to marketers and retailers in most markets.
For example, since Feb. 19: In the Gulf region, unbranded has dropped more than 13 cents and branded more than 11 cents.
In the East Coast region, the average unbranded rack is down 10.9 cents and branded is down nearly eight cents and even direct dealer buying prices slipped 0.58 cents. In the Midwest region, branded and unbranded racks are down seven to eight cents per gallon. In the West, unbranded declined nearly six cents on average.
Retail margin on regular recovered too, after languishing at a low eight cents per gallon during the Jan. 25-Feb. 8 period. Retail margin is now a far healthier 14.86 cents (similar to calendar-year average margin during both 2011 and 2012).
So both these downstream sectors, refining and retailing, have achieved more attractive margins on gasoline, permitting the pass-through of lower costs: crude for refiners, wholesale gasoline for retailers.
Unfortunately for the petroleum industry, good margin often attracts undeserved blame rather than well deserved praise. Improved downstream gasoline margins are a key reason that the long street price hike has lost its momentum.
If crude oil prices allow, and U.S. refinery repairs and maintenance projects do not suffer big setbacks, then retail gasoline will stop rising soon and back off.
Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.