Gasoline Prices Following Historical Pattern, Says NACS

ALEXANDRIA, Va.--March 3, 2004--It's not something new that is causing gasoline prices to rise but something old.

Limited U.S. refining capacity, strong demand for gasoline and complex seasonal gasoline blend requirements across the U.S. have again driven up wholesale gasoline prices, just as they have in previous years, according to the National Associational of Convenience Stores (NACS).

Because convenience stores sell an estimated three-quarters of the gasoline purchased in the United States, conveniences store retailers are concerned by recent wholesale gasoline price increases.

NACS compared the gasoline markets to the Bill Murray movie "Groundhog Day" in which his character relives the same day.

"Like the character in 'Groundhog Day,' the petroleum markets experience similar conditions over and over--except on a seasonal, rather than daily, basis," said NACS Director of Motor Fuels John Eichberger. "While the factors contributing to the price volatility change somewhat, springtime supply/demand imbalances have led to price increases of 26-36 cents each of the last four years."

When wholesale prices go up, prices at the pump typically lag as retailers absorb some of the wholesale price increase by reducing their margins to remain competitive. Price volatility in 2002, for example, helped shrink margins to their lowest level in 17 years.

Many retailers also report an increase in gasoline theft, or "drive-offs." In addition, retailers lose in-store sales as consumers often reduce their other purchases when faced with rising gasoline expenses and blame the retailer for the increases, even though the retail part of the price of gas is the smallest of the four components--around 13 percent--of the price of gasoline.

NACS said that wholesale price increases through early February were caused by significantly higher-than-normal crude oil prices, and the recent increases are because of seasonal factors, including refinery maintenance; the transition to summer-blend fuels; the transition to ethanol-blend fuel in California, New York and Connecticut; and increases in international and domestic demand.

NACS represents 1,900 retail member companies. The U.S. convenience store industry, with 132,400 stores, posted $290 billion in total sales for 2002, with $181 billion in motor fuels sales.