CAMARILLO, Calif. -- The U.S. average regular grade retail price jumped 13.93 cents per gallon in the past two weeks to $3.0919, according to the most recent survey Lundberg Survey of approximately 7,000 U.S. gas stations. Much of this increase came from a recovery in retailers' margin, the first shoe to drop.
But refiner margins are still in the doldrumsa mere fifth of what they were at their spring height, according to Lundberg. Their wholesale-gasoline selling prices have not kept pace with their crude-oil [image-nocss] buying prices. When this second shoe drops, the market should see a gasoline price rise of perhaps 8-15 cents.
Retailers may well lose some of their recent gain, as still-flat demand equates to retail price pressure. For refiners, some in seasonal maintenance and some curtailing runs due to poor economics, it is a gloomy season. Since OPEC price hawks are much louder than the doves (and new member Ecuador, echoing hawk Venezuela, adds a voice), it's difficult to imagine a production hike announcement at their December meeting, Lundberg said.
Also unlikely is an oil-demand crash, since petroleum amounts to just 2.77% of world Gross Domestic Product (it was 5.42% of GDP in 1981 at the time of the prior record oil price). Assuming little change in oil production or demand, oil prices aren't likely to fall substantially. The question is: Will refiner margin recovery be soon, or very soon?
The current U.S. average $3.09 is within 9 cents of the all-time inflation-adjusted high reached last May. Crude already surpassed its true high (March 1981, the same month as retail gasoline). Less than one-fifth of oil's price surge comes from the dollar's lower exchange rates; most comes from strong demand.
Futures-market speculators doing their homework see that the oil price is still not so high as to puncture world demand. No wonder OPEC and many others point an accusing finger at themthey are anonymous in the aggregate they set the price, and their ongoing decisions are relatively unfettered by either producer or consumer mission.
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