Today, UCAN's gas project at www.fueltracker.com reported a new regional average for San Diego of $2.415 a gallon for regular unleaded. Three weeks ago, when gasoline averaged $3.14 a gallon, (see previous post) we made the alarming prediction that at least a few gas stations would be selling gas for less than $2.50 a gallon, and that the average price would be dropping very quickly. We also explained how the oil industry fights price-cutting using zone pricing.
We are now going to make an equally shocking prediction: In the next 10 days at least a few unbranded independent stations in San Diego will be selling gasoline for less than $2 a gallon.
"At this time, the downward price pressure on gasoline is overwhelming," says Charles Langley, Manager of UCAN.org's gas project.
What's ironic, says Langley, is that some refineries are actually losing money selling gasoline to their dealers. Today the spot market price for a barrel of gasoline in New York Harbor was $52.08, while the price for barrel of oil was $57.04. "This means that some refineries will lose about $5 a barrel turning oil into gasoline. They're updside down." says Langley.
The typical margin for a refinery is 25 cents to 40 cents a gallon on gasoline. Retailers typically make a margin of 5 to ten cents a gallon. However, in the last 24 months, some refiners have been able to turn profits as high as an unheard of $1 a gallon for their gasoline.
UCAN expects this trend to continue for at least a couple more weeks.
At this time, unbranded independnet stations are the biggest cost-cutters. Because unbranded stations can shop different suppliers for their fuel, they are often able to buy gasoline at a discount and pass the savings on to consumers. Right now unbranded dealers are making very healthy profit margins.
Unfortunately, for the last 18 months, many of these dealers have lost money. Often, for months at a time, their wholesale price has been higher than the retail prices at brand-name stations.
Today the North County Times ran a very good story documenting this unhealthy trend.