Gasoline’s Plunge 55-Day Accelerates:
DiMaggio Streak Will Break Soon &
Sub-$4/gal Arrives this Week

Monday, August 8, 2022

Retail gasoline prices as compiled by OPIS for AAA today dropped for a 55th consecutive day, and global bulk markets suggest that the slump will extend through next week if not beyond that point. Tomorrow will see the streak of lower prices match the most famous streak in sports (DiMaggio’s 56 game hitting streak) with drops most likely moving into the 60’s or more.

But a review of OPIS’ retail database in the last 25 years demonstrates that the ongoing decline is nowhere near a record for up or down retail price movements.

Some elements of this streak are still very notable. Fifty of the fifty-five average US gasoline price declines have occurred since the summer solstice with prices shortening up in concert with northern hemisphere daylight. Slumps in 2001, 2006, and 2015 covered small portions of the so-called “driving season.”

The most epic downturn occurred in the last 25 years spanned portions of 2014 and 2015. Motor fuel prices started to edge lower in late September and average numbers didn’t creep higher until January 26, 2015, a stretch of 124 days. The initial decline could be credited to normal demand drops as well as the easier path for manufacturing autumn and winter gasoline blends after September 15. But the downturn was not interrupted by any wobbles higher thanks to a late November 2014 OPEC meeting that was filled with rancor as well as a failure to address quotas among member countries. Crude oil prices dropped dramatically with gasoline and diesel moving lower for nearly four months as raw costs plunged for refiners.

(While the OPIS database goes back to 1997, there is little doubt that the longest streaks occurred in this century. Prices tended to much choppier with significantly smaller moves in the 20th century.)

The daily expense incurred by customers in this latest price descent is somewhat unprecedented. In early June, when US average prices hit $5.015/gal, a back-of-the-envelope assessment of cost yielded a per diem rate of about $1.917 billion.

The calculus for that total takes the EIA assessment of about 9.1 million b/d for demand in first half June and multiplies it by 42 to get gallons which were priced on average at the $5.015/gal number.

In contrast, some 55 days after the price peak, one can plug in today’s average price of ~$4.05/gal with the most recent demand measurement of 8.54 million b/d. That calculus yields a per diem total of $1.453 billion for a cost reduction of $464 million. That reduction may yet represent savings of more than half a billion dollars/day before mid-August.

But In order to better the record streak for a US gasoline price retreat, pump prices would have to continue their drop for the aggregate price reduction in a streak, US gasoline prices would have to move down for another 69 days. And in order to match the greatest price decline, motor fuel would have to slip another $1.234/gal in order to match the unprecedented decline of $2.199/gal that was delivered in 2008 when the Great Recession delivered a near-knockout blow to US and global economies in just 87 days.

Top Ten Price Declines on Record (measured by duration)

Why is it so easy to predict more down days in August? The answer lies in the relationship between wholesale laid-in costs (including taxes) and street prices. The 55-day stretch has seen gross margins regularly top 70-75cts/gal (the August 8 gross margin is 68.0cts/gal. Retailers will accurately note that their costs for labor, credit card fees, transportation and other items have escalated, but gross margins can easily drop to 40-45cts/gal in coming weeks and months. The current numbers imply a further 20-25cts/gal drop in street prices for gasoline unless tropical weather or refinery downtime interrupts.

Meanwhile, streaks of up days have only twice topped the extent of the current downturn, making the “rocket-and-feather” metaphor a bit convoluted. The longest stretch of higher days for gasoline occurred in 2018 when prices rallied from $2.273/gal in winter to $2.842/gal by April 2019. Prices moved up for 68 consecutive days.

Surprisingly the advance this year was interrupted in late February, just before average prices soared on the back of the Russian invasion of Ukraine. Some choppiness in wholesale prices near the end of the second quarter delivered a few insignificant price decreases, as did some state tax holidays.

Top Ten Price Advances on Record (measured by duration)

Footnote: for those who regularly keep score, the current stretch of falling prices would have to reach October 17, 2022, for it to match the epic 2015 duration. It’s possible but highly improbable given the gauntlet of threats to supply from hurricanes, power outages, and international mischief from Russia that may color the next three months. The Great Recession of 2008-2009 delivered 87 days of consecutive declines, but that’s a sharp economic downturn is not something that would please consumers beckoning for price relief.

© 2022 Oil Price Information Service, LLC. All rights reserved.