Who Wants to Blink First and Raise Prices?

By: George Butler / June 20, 2018

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On May 22nd we were hoping for a market correction prior to the holiday weekend. On that day the front month NYMEX RBOB contract settled at $2.2636. Climbing from May 2nd, close @ $2.0803. A whooping $0.18 price move inflicting severe pain on your local gas station distributor leaving retail gasoline margins negative in some markets and begging the question, who wants to blink first and raise prices?

As luck would have it the market started to correct May 23rd and the balance of the week closing at $2.1743 May 25th. A nice $0.09 down move followed by another $0.04 move lower on May 29th, the first trading day after the weekend giving distributors some price relief.

Since then we have the opposite scenario. Yesterday’s close @ $2.0379 marks a $0.2250 NYMEX price decrease from May 22nd. Logically, one would think retail margins are excellent and your local distributor/retailer is recovering. IF SO YOU ARE WRONG ! On the price downside station operators pass along price decreases much faster than price increases trying to grab market share and gain store traffic. Speaking to some local Pennsylvania distributors this morning they once again report very little or no margin being made at the pump.

Now that school is out and the summer driving season is here it’s time for the retail gasoline business to make money but with the market volatility described above the only way is for price discipline on the street.

 


Categories: Oil Prices, fuel prices, summer, Gas Prices, gas, gasoline prices, Industry Update, US crude


George Butler

Written by

George Butler


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