The latest data from the U.S. Energy Information Administration (EIA) showed that the average cost for Regular gasoline in America rose by 0.2 cents over the past week to $2.25 per gallon. That was only the 4th weekly increase in the past sixteen weeks, and it left the price consumers are paying at the pump still more than 6 percent below the 2016-to-date high of $2.40 per gallon hit in June. Regionally, the cheapest gas in the country can be found in Texas, where a gallon of Regular costs just $1.99 on average. Residents of California as usual have to pay the most in the continental U.S. for Regular ($2.80/gallon), and San Francisco is again the city with the nation’s highest average price ($2.93/gallon). The pullback at the pump from this summer’s highs is not too surprising since the cost of oil has also declined considerably since mid-June, with West Texas Intermediate (WTI) crude even briefly dipping below $40 per barrel in August.
Current gasoline prices, though, are actually more than 4-percent higher than they were in mid-August due in part to upward pressure on the price of oil recently. Short-covering was the initial catalyst for the move higher in crude but growing supply concerns have exacerbated the rally and even helped oil be one of the best performing asset classes in the month of September. For example, the Organization of the Petroleum Exporting Countries (OPEC) last week agreed to limit production to support prices, and this week additional supply pressures could result from hurricane Matthew, which is headed towards the Florida Straits, a major shipping lane connecting the Gulf of Mexico to Atlantic. However, many analysts still believe that crude prices could pull back due to doubts about how strictly some OPEC members will adhere to the organization's new production agreement. Further, recent data from Baker Hughes showed that the number of U.S. oil rigs in operation just posted the largest quarterly rise since 2009. This implies the potential for greater upward pressure on oil and gas supplies, and hedge funds appear to have responded by reducing their bullish bets on oil. Such short-term fluctuations, though, have not had a marked effect on Americans’ driving habits, and data out last month on retail sales showed that the price swings at the pump have not had a significant influence on broader consumer spending behavior.
Sources: U.S. EIA, DShort, GasBuddy, Bloomberg, Twitter, Reuters, CME, ICE, CFTC
Post author: Charles CouchDisclosures