The case for a nationwide $3.00 gal national average has been weakened substantially in the last week. We may be within a few pennies of the 2007 pre-hurricane season top, and I wouldn’t be surprised to see prices below $2.75 gal on the first day of Summer.
But now that I have your attention, would you like to win a bet with your fellow consumer? In a moment, I’ll share a method for extracting a few dollars from the teeming masses.
But first, let’s take a look at the fuel market and leave the betting to Pete Rose.
The peak of the Spring 2007 gasoline rally may finally be past tense. Gasoline futures have shed nearly 16cts gal of their value in the last few trading sessions, and wholesale prices are down as much as 20cts gal from last week’s peak. The wholesale price losses rendered yesterday and today represented the largest declines of this huge bull run for gasoline which began in the fourth week of January.
It’s been a very rugged stretch for gasoline retailers in that period. The public commonly believes that those on the endpoint of the gasoline distribution chain make profits of 50cts gal or even $1.00 gal on sales, but reality doesn’t match perception. Year-to-date gross margins at the pump have been barely above 12cts gal, and credit card processing fees remove a huge slice of that margin before overhead and other costs are considered.
But it’s been an incredible run for refiners. I’ll cite some numbers on that run tomorrow. But today, I’m going to concentrate on the street prices.
Using the OPIS database, I looked at pump prices for unleaded regular gas and diesel in the first 107 days of 2007. I then compared those numbers to the same period for the five previous years. Stats, please:
Jan 1 – April 17 Nationwide Retail Prices
Unleaded Regular Diesel
2007 $2.404 gal $2.674 gal
2006 $2.400 gal $2.868 gal
2005 $1.981 gal $2.415 gal
2004 $1.678 gal $1.983 gal
2003 $1.598 gal $1.866 gal
2002 $1.216 gal $1.475 gal
Editor’s Note: Here’s where you can take advantage of the misperception with an average Joe (or Jane, to be PC) A few weeks from now, just ask someone, whether on average, they feel they’ve paid more or less for their gasoline this year than last. Nearly everyone will insist that prices have been much higher in 2007 than 2006. I think they’ll be wrong. At the moment, it’s a dead heat for gasoline, and diesel was higher in 2006.
But what about California, you might ask? It is indeed an exception and could continue to be an exception for much of the year. Here’s the same comparative data for the Golden State:
Jan 1 – April 17 Retail Prices (California)
Unleaded Regular Diesel
2007 $2.876 gal $3.308 gal
2006 $2.585 gal $2.612 gal
2005 $2.212 gal $2.165 gal
2004 $2.000 gal $1.671 gal
2003 $1.942 gal $1.682 gal
2002 $1.400 gal $1.273 gal
Californians have paid about 30cts gal more for their average gallon of gasoline this year versus 2006 and they are paying more than twice what they meted out in 2002. Diesel is even more expensive, with a 69cts gal year-on-year increase, and a price about 160 percent higher than the 2002 rate.
Other West Coast states are similarly more stressed than heartland, East Coast, and Gulf Coast states. But it’s a mixed bag for most of the country and proof that this is a complex business, with complex statistical weather that needs to be challenged on a regular basis.
Note: I get my information from the OPIS historical database, which follows extremely granular and extensive data for wholesale and retail prices each day. People in the investment community that need good research, rather than anecdotal data, on fuel prices should use this database. If you’re interested, you can contact Fred Rozell at 732-730-2568 or frozell@opisnet.com for details.