Gas Prices Continue Decline, But So Do Retailer Margins

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Gas Prices Continue Decline, But So Do Retailer Margins

NEW YORK -- Retail margins on gasoline, which have been increasing during most of the dramatic decline in oil prices since this summer, have tightened recently as street prices declined twice as fast as wholesale prices in the past week, according to an industry newsletter that tracks retail gasoline and diesel prices and profits.

OPIS’ Retail Fuel Watch newsletter reported retail gasoline prices dropped 18.9 cents nationally to $2.26 per gallon last week, compared to the previous week. Meanwhile, the nation’s wholesale rack prices fell nearly 10 cents as average rack costs dropped under $1.54 per gallon.

"The result," said OPIS, "was that retail margins, still at healthy levels in most of the country, turned tighter. On average, pump profits nationwide dropped 8.7 cents week-to-week, and at 27.4 cents, they averaged nearly half of what marketers made on gasoline sales when margins peaked a month ago."

Oil prices Thursday fell as low as $49.75 a barrel, a price not seen since May 18, 2005. Light, sweet crude oil for December delivery is down $2.64, nearly 5 percent, at $50.98 a barrel on the New York Mercantile Exchange.

Gas prices continued to drop this week. The national average for a gallon of regular unleaded stood at $2.02 Thursday, according to AAA, nearly 3 cents less than the previous day and more than $1 cheaper than a year ago. Since July, gas prices have declined by more than 50 percent since a record high of $4.11 that month.

Gas has fallen below an average of $2 a gallon in 23 states. Alaska is the most expensive state to buy gas, while gas was cheapest in Missouri, according to AAA. And demand is expected to decline further. On Wednesday, the Department of Transportation said Americans are cutting back on driving, logging almost 11 billion fewer miles in September. The AAA said this week that the number of Americans traveling during the Thanksgiving weekend this year is expected to decline for the first time since 2002.

"The overall state of the economy continues to present real challenges for some Americans looking to travel this Thanksgiving," AAA President and CEO Robert L. Darbelnet said in a statement. "However, the desire to spend time with family, combined with significantly lower gasoline prices than earlier this year, will provide a strong impetus for many Americans to travel this holiday season."

More than 33.2 million Americans—81 percent of holiday travelers—are expected to travel by automobile. That’s down 1.2 percent from the 33.6 million people who drove a year ago.

Meanwhile, OPIS reported the thinnest margins on gasoline sales at the pump were in the Great Lakes region, while the highest margins were being generated in the West.

"Tighter profits at the pump, given recent sky-high levels and mounting evidence of a hangover in consumer fuel demand left over from summer, were certainly anticipated by many in the industry," the OPIS newsletter reported. "Despite some recent indication that demand losses may be moderating amid the steep fall in prices, it remains a spur for more price cuts as marketers battle for customers."

For more on regional gasoline prices and margins, go to