The statewide average gas price has moved up each of the last four weeks. While the increases are often due to increases in the prices of oil, Department of Agriculture fuels analyst, Harold Hommes, says it looks like the recent increase is some profit taking by retailers.
“In the past month or so I think the margins at retail had gotten a little tight, and this one is probably being passed along by distributors and retailers, other than about a penny or two increases cost at the wholesale terminal,” according to Hommes. The average cost of a gallon of gas was $2.37 four weeks ago, and it is now up to $2.9. Hommes says the market hasn’t favored retailers lately.
“Each distributor has a little bit different goal if you will, or margin that they like to maintain. Sometimes competitive pressures require they dip below those, and I think we’ve been in that situation for much of the last two to three months. I think this is an attempt to restore some of those traditional margins,”Hommes says. The run up to Memorial Day and the start of the summer driving season traditionally has been a signal in the past for prices to start moving up as demand increases.
But Hommes says that hasn’t happened recently. “For the last couple of years actually, it’s been flat, in one case I think it actually fell the week or two prior to Memorial Day,” Hommes says. “But it is true in conjunction with that date when you get into June, schools are out, people start traveling on vacations, more summer travel does occur, so demand does go up.”
Hommes doesn’t see any jump in prices caused by summer travel demand to last very long. “Sometime here really shortly — maybe with this recent price hike — I look for values to really top out much earlier this summer, probably by June,” Hommes says. “And I think they are going to be on a fairly long downhill slid thereafter towards the later part of the year.”
Hommes says there haven’t been any big concerns with refineries and productions to push the gas prices up. “Supplies are phenomenal right now — both on crude and gasoline, diesel inventory, refined products if you will. And so, as long as that situation stays the same, I think we’re running 93 to 95 percent refinery utilization,” Hommes says. Iowa’s average gas prices is eight cents below the national average, and 89 cents below one year ago at this time.