The latest data from the U.S. Energy Information Administration (EIA) showed that the average cost for Regular gasoline in America fell during the past week by three cents to $2.36 per gallon, the first weekly decline since November. Regionally, the cheapest gas in the country can be found in South Carolina, where a gallon of Regular costs just $2.08 on average. Residents of California as usual have to pay the most in the continental U.S. for Regular ($2.81/gallon), and San Francisco is again the city with the nation’s highest average price ($2.95/gallon).
Despite last week’s small decline, the average price consumers are paying at the pump is still 9.5 percent higher now than it was just prior to the announcement of the agreement by OPEC members to cut global oil production in 2017. Fluctuations in crude prices are a major factor behind what Americans will ultimately have to pay for gasoline, and encouragingly the oil market rally appears to have somewhat stalled recently, in part because hedge fund bullishness has moderated. This does not necessarily mean that professional money managers are turning bearish on crude but rather that hedge funds for now have stopped adding to their long positions, perhaps related to profit taking.
More importantly, the latest multi-week uptrend in oil and gasoline prices contributed to December’s large gain in the headline consumer price index (CPI). Inflation pressures, though, have also been building outside of the energy arena, e.g. shelter and medical costs. This means that continued price increases at the pump could start to put a noticeable strain on consumers’ wallets. Since Americans have mostly responded to cheaper gasoline by driving more, this may not bode well for retail sales if wage growth does not begin to accelerate as well.
Sources: U.S. EIA, DShort, GasBuddy, Bloomberg, Twitter, Reuters, CME, ICE, CFTC
Post author: Charles CouchDisclosures