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CSP, October 10, 2016:
Retailers' and Refiners' Margins Slip
As downstream profits narrow, upstream gains

CSP, September 26, 2016:
Gas Prices Get Over Biggest Summer Hurdle
Is the pump price increase about to end?

CSP, September 12, 2016:
Meager Margin Recovery
Wholesale prices follow oil’s bouncing ball

CSP, August 22, 2016:
Pump Price Drop Ends
Retailers’ margin loss doesn’t

CSP, August 8, 2016:
Retailers Lose Again
Margin down 26 cents in a month

CSP:July 24, 2016:
More Downstream Margin Erosion
Pump price drops more than 7 cents
as supply outpaces demand

CSP, October 10, 2016:
Retailers' and Refiners' Margins Slip
As downstream profits narrow, upstream gains

CAMARILLO, Calif. -- As the national retail gasoline price gained another 3.71 cents in the past two weeks to reach $2.2894 on Oct. 7, both downstream sectors—refiners and retailers—suffered gasoline margin slippage.

Refiners lost margin because pass-through of higher crude-oil buying prices into wholesale gasoline prices fell short. Retailers lost it because pass-through of higher wholesale gasoline buying prices into street prices fell short, according to the most recent Lundberg Survey of approximately 2,500 U.S. gas stations.

Retailers on a national basis, weighted by class of trade, paid 4.77 cents per gallon (CPG) more on regular grade Oct. 7 than they did two weeks prior, costing them 1.07 cents in margin. While the loss may seem modest, it comes at a time when many costs of doing retail business are on the rise.

While downstream lost margin, upstream gained. Crude-oil prices bounced up late last week, in part thanks to boisterous reaction to the Organization of the Petroleum Exporting Countries (OPEC) saying it favors an oil production freeze or curtailment. Oil, the biggest slice of the retail gasoline price pie, may or may not hold its gain or see an increase, with the formal OPEC discussion about seven weeks away. The oil market may look back on OPEC’s statements as a bone being thrown to its “Price Hawk” members, but not a full meal for Iran, Venezuela, Angola and the various western observers who are applauding the latest oil price up-talk.

Oil price factors more mundane than OPEC meetings—chiefly global oil demand—are ever-present. One sober interpretation of OPEC’s talk of instigating new quotas for members comes from Oil & Gas Journal editor Bob Tippee, who described the plan as vague and elusive.

The U.S. average retail price has been edging up since Aug. 5, a total of nearly 13 cents over nine weeks. Crude-oil prices led the way over the past nine weeks and the latest two weeks. Smaller influences than crude oil on gasoline prices were last month’s Colonial Pipeline breakage and higher prices of Renewable Identification Numbers (RINs).

Meanwhile, other gasoline market inputs weigh in for price weakness instead of strength, including Hurricane Matthew suppressing demand, winter grade gasoline’s lower cost taking over the gasoline pool, and the winter season’s perennial lower gasoline demand as motorists have fewer daylight hours and less clement weather.

In several large gasoline markets, retail prices slipped over the past two weeks. Atlanta slipped the most, as prices began a big retreat from their spike caused by the pipeline mishap. They dropped in some cities far from Colonial territory too. Salt Lake City has been jolted, with a retail margin crash of nearly 19 CPG to less than 6 CPG, as the weighted wholesale price shot up 14 cents while the street prices took a nickel dive.

Right now the all-grades weighted retail gasoline margin is 17.75 cents, falling short of full-year 2015 by about 2 cents.

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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