Retail Station Profits Spiral Lower
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Gasoline and diesel fuel retailers across the U.S. continue to see gross station profits sliding. In fact, the latest data compiled by OPIS Retail Fuel Watch (RFW) points to the lowest gasoline profits in 10 weeks and the tightest diesel margins in more than three months.
RFW reports that U.S. gasoline retail margins declined to 15.8cts/gal on the week and have been cut in half over the five weeks. Diesel profits plunged to 16.9cts/gal nationwide, off 35% in four weeks. The decline in diesel margins has taken place over a more extended period than gasoline.
Station profits are the tightest in the Southeast and Southwest where gross margins are just over a dime. That means gallons sold via bank credit cards are yielding hardly any margin for retailers. Midwest and Great Lakes margins are also snug, but the Great Lakes picture is going to improve over the next couple of days thanks to a sharp drop in Chicago bulk gasoline prices from their lofty heights of last week.
The West is the most profitable market, but even there gross margins have come down. Retail prices in the West are higher because of a hike in state gasoline taxes, but that is of no help to gross margins.
RFW looks at a monthly comparison between wholesale and retail prices on a state-by-state basis. Almost without exception average wholesale prices have risen in the last month much faster than retail. In some cases, the difference is more than 20cts/gal.
The U.S. Energy Information Administration (EIA) said this week that October pump prices averaged $2.51/gal in October, a decline of 14cts/gal from September when they hit the highest average price for any month since July 2015, all because of hurricane-induced supply interruptions.
For the current month, EIA predicts retail regular-grades prices will average $2.47/gal, a prediction that might fall short of the mark since prices are on the rise thanks to sturdy crude oil values. Currently, OPIS data shows the national average to be $2.535/gal with prices already up 7cts/gal for the first week of November. Prices are also 32cts/gal higher than a year ago.
California pump prices are 23cts/gal higher in the first week of November thanks mostly to a big hike in the state's tax on gasoline. California retail gasoline is 42cts/gal higher than a year ago.
Whether or not EIA revises any of its forecast remains to be seen. EIA envisions pump prices to average $2.40/gal for all of 2017 and $2.45/gal for 2018. Year-to-date U.S. retail regular prices average about $2.38/gal.
--Ben Brockwell, bbrockwell@opisnet.com
The OPIS Demand Report is the only source that tracks actual store volumes from retail stations every week. Retailers can determine how well their station volumes are performing at a regional and national level - so fuel managers know exactly where they stand. The data represented within this report is diversified with a good mix of high-volume and low-volume sites. Regional chains, national chains, new era marketers, and branded retailers are all included in the dataset to provide an accurate view of the market. Learn more about the OPIS Demand Report: www.opisnet.com/products/retail-fuel-demand.aspx
Copyright, Oil Price Information Service
