A recent report by MasterCard (
) showed that the gasoline prices were up by 35% for the week
ending April 22, compared to year-ago levels and high gasoline
prices are having a limited impact on the U.S. consumer's demand
for fuel. Average U.S. demand for retail gasoline over the past
four weeks fell by just 2% compared to the same period of 2010..
The figures are estimates by MasterCard Advisors, based on
aggregate sales in the MasterCard payments system coupled with
estimates for other payment forms including cash and checks.
MasterCard competes with Visa (
We have a price estimate of
$293 on MasterCard's stock
which is about 5-6% above the current market price.
Gasoline demand and prices are important figures for MasterCard
as gasoline is one of the most frequent items purchased on credit
cards. MasterCard charges gas stations when they accept payments
for fuel using MasterCard-branded cards and higher gasoline prices
will result in higher fees charged by MasterCard.
Gasoline price and demand figures above indicate that prices are
going up rapidly but demand is not falling as sharply as expected.
One of the reason for this could be a lack of substitutes of
gasoline available for retail consumers.
Thus, if we see continued higher gasoline prices in the future,
the gross dollar value of credit card transaction will increase for
MasterCard. This will increase the average authorization,
settlement and switch fees per transaction charged by MasterCard.
We estimate that MasterCard's authorization, settlement and switch
fee per transaction will decline to 7 cents from 2013 onwards, from
its current level of 8 cents, due to high competition and
However, stronger gasoline demand and prices could help maintain
the current level of 8 cents per transaction and if maintained
would add about 5% increase in our base price estimate for
See our full analysis of MasterCard