Spring begins on Monday, March 20, 2017. Expect to be greeted by warmer weather across most of the U.S. Also expect to be greeted by a strange dance between crude oil and gasoline prices, because things are a bit wacky in this commodity market. Today’s average price for regular gasoline across the U.S. is $2.297 per gallon.
One can see from the chart below, that the spread for gas prices is less than 5¢ over the past 30 days:
While a gallon of regular unleaded gasoline is $0.317 higher than one-year ago, I haven’t heard any moans or complaints about today’s prices. However, I expected to see higher gas prices this month being driven by petroleum refiners switching from winter to summer blends. This process usually begins in late February or early March of each year.
The next logical question is what’s happening in this commodity market that I am not aware of? Conventional wisdom says to follow the money. I did, and the path leads to the crude oil markets.
As a beginning, let’s take a look at crude oil prices over the past 30 days:
Ay-yi-yi-yi! One can see from the NASDAQ chart above that over the past 30 days, crude oil prices bounced around $54 per barrel for West Texas Intermediate (WTI) before plunging to $48.78. This downward trend began about 10 days ago and may explain the lower than expected gas prices.
What gives? A good explanation is provided by senior petroleum analyst Patrick DeHaan of GasBuddy.com who wrote on March 13, 2017:
“With little warning or expectation, crude oil last week broke out of the rut it had well established, with crude prices falling out of a 3-month range of $51-$54 per barrel to $49. Fundamentals of oil have weakened, and with last week’s large 8.2 million barrel rise in crude oil inventories, the market has turned decidedly bearish for now.”
This plunge in crude oil prices appears to have had an impact on gasoline prices at the pump. It also appears that the global market for oil is currently oversupplied! How long this will last remains to be seen as other forces, such as OPEC’s voluntary production cut that began on January 1st and planned and unplanned refinery maintenance occurs.
My sense is that we’ll see higher gas prices at the pump soon enough, so go ahead and fill ‘er up while they last!