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CSP, January 9, 2017:
Opinion: Pump Price Up 12 Cents Over 3 Weeks
Everybody got some extra margin—except retailers

CSP, December 19, 2016:
Opinion: OPEC’s Muted Oil Price Effect
Pump price up, but overall 2016 showed a big drop

CSP:December 5, 2016:
Opinion: OPEC Boosts Prices at the Pump
Retailers get slammed by cutback agreement

CSP, November 21, 2016
Pump Price Slips Despite Oil-Price Bump
Retailers and refiners chase gasoline sales, as retail margins grow

CSP, November 7, 2016:
Where Did the Oil-Price Decline Go?
As retail margins widen, these signs point to an imminent crash

CSP, October 24, 2016:
Gasoline Market Thumbs Nose at Crude
Seasonal factors keep prices in check—for now

CSP, January 9, 2017:
Opinion: Pump Price Up 12 Cents Over 3 Weeks
Everybody got some extra margin—except retailers

CAMARILLO, Calif. -- In the past three weeks, crude-oil prices are up. U.S. refiner margins on gasoline are up. Wholesale racks and dealer tank wagon (DTW) prices are up too. The average pump price is up. Tax on gasoline is up.

Oil producers, refiners and even the Tax Man (in some states) got an extra helping of goodies since Dec. 16.

But gasoline retailers lost another 1.33 cents in margin on regular-grade gasoline and now are living on a slim 13.58 cents per gallon (CPG), according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations. This is while their business costs continue to rise. In some markets, the apparent margin on regular shouts red.

Denver doldrums are bad: Margin in this market has swung from above 26 cents in late November, to less than 7 cents two weeks later, to a mere 4 cents. And now, on Jan. 6, the margin suffers at a negative 9.75 cents. Between Dec. 16 and Jan. 6, the weighted wholesale buying price in Denver climbed nearly 13 cents, but the average street price dropped a penny. There are other markets where retail margin woes have become acute.

The national average retail price of regular grade is now $2.3777, up 11.97 CPG since Dec. 16.

Between Dec. 16 and Jan. 6, retail gasoline was catching up to crude-oil prices that have been rising since around early November, while pump price hikes lagged. On top of oil price increases emanating from expectations that the Organization of the Petroleum Exporting Countries (OPEC) and cooperating producers would reduce supply in 2017 and—less reported but important—from world oil demand, especially in China’s industrial sector, the U.S. downstream oil industry is now shouldering new burdens. 

One is the ratcheting down of average gasoline sulfur content allowable by the Environmental Protection Agency (EPA) to just 10 parts per million (ppm) on Jan. 1, vs. 30 ppm in 2016, which adds to refining cost. The other is gasoline tax hikes in several states effective Jan. 1, accounting for 0.62 CPG within the last three weeks’ pump price rise of 11.97 CPG.

Short-term demand prospects are not bright, thanks to the seasonal deprivation of January being uglier than usual due to extreme weather, coupled with the current retail price penalty of nearly 33 CPG above the year-ago price. Consumers are paying for oil price hikes, regulatory cost hikes and tax hikes, which is negatively affecting demand.

Unless crude-oil prices back off, consumers will pay a little more sometime soon when retail margin, per force, expands to a more realistic delta.

Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries. Click here for previous Lundberg Survey reports in CSP Daily News

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