Gas Stations Yielded Record Gross Margins in 2022

The 2022 year was a record year for gasoline retailers, with $59.2 billion in national sales, exceeding the previous record by nearly $15 billion. Study by Lundberg Survey, which provides statistical reports to the oil industry, found that retail margins surged in July and onward, following President Joe Biden’s drawdown of the Strategic Petroleum Reserve (SPR).

Many big gasoline companies have found a year of volatility in oil prices to be a boon.

In the ten years ended in 2019, the average retail gas provider made $0.171 per gallon. This was compared to $0.101 in the ten years prior. Due to sanctions against Russia increasing oil prices and reducing retailers’ margins, the margins for 2022’s first half fell to $0.135 per gal.

This trend reversed dramatically halfway through the year.

According to the Lundberg report, margins rose an “historic run to the upside enabled by falling wholesale prices.” In July, gasoline retailers made $0.798 per gallon and averaged $0.431 per gallon throughout the year. This was a significant increase over previous decades.

However, gross margins do not always equate with profit. According to the report, gasoline margins refers to gross margins that retailers must use to pay a lot of overhead costs.

“It is only after covering all of these costs that a retailer may or may not achieve a profit,” the report noted, adding that many crucial business costs, including labor, have been rising in recent years.

Biden will be celebrating April Begin To offset rising energy costs, he has a six-month plan to put SPR oil on sale in the open market. Release By year-end, 180 million barrels Wholesale prices—the prices paid by retail distributors like Gas stations—fell significantly during the second half of 2022.

WTI crude oils spot price over one year (YCharts).

After peaking at a little over $5 per gallon—an all-time high for the United States—the national average retail gas price has fallen At the time of writing, it was $3.30

Contrary to popular belief rising oil prices are often a problem for gas stations because they cannot pass on the costs to their customers. Falling oil prices can have the opposite effect.

Lundberg summarised the dynamic in the report as follows: “The irony that is true most years was exaggerated in 2022: When motorists (and politicians) are most angry with purported retailer profiteering is actually when dealers are seeing margins squeezed. Motorists and dealers are both feeling pain. Then, when pump prices begin to fall and gasoline is out of the news, that’s when retailers see margins rise.”

However, gas retailers might not be able to enjoy such high margins for very long. Economists predict a rapid rebound in oil prices, which could cause wholesale gas prices surge.

Although oil prices have declined since the summer 2022, they remain high. At the time of writing, Brent crude was priced around $79 a barrel.

The June 2022 price of oil reached $114, according to economist Peter Schiff. Schiff blamed the high oil prices on environmental, socio, and governance policies. However, he warned that the proposed ESG policies could lead to a collapse in the economy. “windfall profits” Taxes will only increase the problem.

Sen. Elizabeth Warren (D-Mass.) Sen. Elizabeth Warren (D.Mass.) was co-sponsor of the Big Oil Windfall Profits Tax Act Bill last March, which would tax excess earnings at 50 percent—“excess” That is, oil barrels that are sold above a certain price threshold as defined by the bill.

“If oil prices are high because we don’t have enough oil, the last companies you want to tax are the oil companies,” Schiff In an episode of his podcast from March. “Because if we’re going to get more oil, where is it going to come from? It’s going to come from the oil companies.”

Lundberg’s report pointed out that retail dealer margins are being affected by rising labor costs and credit card processing fees.

“A repeat performance in 2023 is unlikely,” The report was concluded. “We expect margins to dip in 2023, but remain robust and above $0.30 per gallon on average.”

Liam Cosgrove is a freelance journalist who covers finance, markets and business. He received his bachelor’s degree in mathematics from the University of California–Santa Barbara.

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