16 August 2011 20:47 [Source: ICIS news]
HOUSTON (ICIS)--Americans are seeing relief at the pumps as the retail industry has caught up with the early August plunge in NYMEX gasoline futures, industry reports showed on Tuesday.
The American Automobile Association (AAA) reported Tuesday’s retail price average at $3.587/gal, down 1.8% from a week earlier.
The drop came after the downward spiral of gasoline futures during the first week of August. NYMEX gasoline prices plummeted 3.7% between 2 August and 9 August, largely as a result of an influx of negative economic news.
The response of retail prices to movements on the futures market is delayed, partly because of the amount of time it takes for gasoline to move from the refinery to the pump.
Retail prices are also influenced by competition among gasoline station owners and gasoline station inventories.
“A dealer may have higher priced inventory that they slowly turn over before they can re-tag a lower price on the next load,” analyst Stephen Jones with consulting firm Purvin & Gertz said. “In deeper, more competitive markets, it can be a lot more prompt with higher turnover.”
A market trader said retail prices always lag behind a price drop on the NYMEX or spot market and do not always fall to the same extent. Retailers will hold off on dropping prices to recover lost profits.
“When prices are rising, retail [profits] get squeezed because prices at the pump may not keep up with the increases at the wholesale level,” the trader said. “So when prices come back off, retailers may be slower to drop prices to try to recover lost margins from the run up.”
As of 12-16 August, retail gasoline prices were still on their way down. Prices for gasoline futures, on the other hand, rebounded to settle at $2.8745/gal on Monday.
In the coming days, gasoline prices at the pump will fall a little more, said the trader. Local competitive conditions will determine if retail prices flatten out or bump higher.
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