Lundberg in

CSP, January 10, 2022:
The Omicron Bounce
Pump price drops again, but may have bottomed

CSP, December 20, 2021
Gasoline Price Cuts: 9 Cents in a Month
Probably more soon, if oil cooperates

CSP, December 6, 2021:
Gasoline Price Has Peaked … For Now
Downstream margins remain well fed

CSP, November 22, 2021:
Oil Down, Ethanol Up
U.S. pump price a no-change at $3.49 per gallon

CSP, November 8, 2021:
Pump Prices Still Climbing
Grateful gasoline margin gains again

CSP, October 25, 2021:
Pump Price Hits Coming Harder, Faster
Gasoline price up another 13 cents

CSP, January 10, 2022:
The Omicron Bounce
Pump price drops again, but may have bottomed

CAMARILLO, Calif. — The national average retail price of regular-grade gasoline declined 1.63 cents per gallon (CPG) in the past three weeks, and it is now $3.3887, according to the most recent Lundberg Survey of U.S. fuel markets. This makes a total drop of 10.43 cents during the seven-week period Nov. 19 through Jan. 7.

A great deal of that dime drop came to a significant degree from Omicron, and the likelihood that there’s no more to come, for now, also comes heavily from Omicron.

The COVID variant’s emergence in last November spooked the oil market big-time because of the potential to slash petroleum demand, and that helped cut retail gasoline prices. But now, in the past three weeks, oil has rebounded: West Texas Intermediate (WTI) during Dec. 13 through Jan. 7 climbed $8.04 per barrel (equivalent in CPG terms to a leap of 19.1), and one of the reasons is the apparent and comparative weakness of this variant, bringing a sigh of relief for oil demand projectionists and a whoop of exuberance for oil prices. Other reasons for oil price strength include OPEC+’s adherence to its pre-planned limited monthly output additions despite entreaties by various world governments.

But as those $8 per barrel are hitting the downstream, U.S. refiners and retailers have not passed through their substantial buying price hikes. Instead, they both lost margin on gasoline.

Considering that oil prices may soon retreat a bit but not fully, and that there is gasoline demand resistance in this trough month of the year plus discouragement from the weak jobs market, refiners’ wholesale price hikes and retailers’ street price up moves may well be moderate or modest, but not dramatic. Although the basket of petroleum price influences is in constant change and juxtaposition, price is impossible to predict; however, at this time, an end to the retail price slide seems imminent.

Refiner margin on gasoline is has been punctured, but it remains historically wide. Retailer margin on gasoline came down to earth with a thump shedding more than 6 cents gal. to just under 32 cents.

Retailers on average have lost 17.5 cents in margin since Dec. 3, but the present level is not acutely low.

There is pressure on retailers to raise street prices. Two examples are Seattle and Houston. In Seattle, typically at the high end as to costs, prices and margins, retailers lost heavily: The average weighted wholesale price jumped 25.75 cents in the past three weeks, while the average retail price edged up just 1.32 cents, slashing margin by more than half from 64.81 cents down to 40.38 cents. Houston, meanwhile, is handing retailers a mere 8.39 CPG in gasoline margin on Jan. 7, thanks to wholesale climbing 5.66 cents while retail dropped 4.29 cents. Upshot: Houston retailers’ Dec. 17 margin of 18.34 cents, not wonderful, was cut by 9.95 cents.

Although these margin portraits are fleeting, they throw the painful volatility of retail gasoline margins into relief. As various business costs march higher and gasoline demand growth continuing to play the patsy of government intervention, the New Year has begun with challenges that rival those of 2021.

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, Calif.

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