The latest data from the U.S. Energy Information Administration showed that the average cost for Regular gasoline in America rose by three cents over the past week to $1.88 per gallon. That was the 3rd weekly gain in a row and the highest reading since early April. Regionally, the cheapest gas in the country as of this writing can be found in Mississippi, where a gallon of Regular costs just $1.51 on average, while residents of California as usual have to pay the most in the continental U.S. for Regular ($2.79 / gallon). The uptick at the pump is of course related to the recent bounce in the price of crude oil that also supports our prior suggestion that the “sound and fury” in the media around negative oil prices last month was probably overblown.
Moreover, West Texas Intermediate (WTI) crude experienced unprecedented volatility in April and briefly dipped into negative territory not because of a permanent shift in the fundamentals but instead due to a confluence of ill-timed factors, e.g. supply and demand imbalances, storage constraints, and futures delivery requirements. Although one cannot completely rule out seeing sub-zero prices again, the more immediate risk in the energy space appears to be to the upside as economies around the globe begin to re-open. Indeed, after extended lockdowns to stem the spread of the coronavirus, several countries and parts of the U.S. have started to lift such restrictions, in turn allowing more people back on the road and therefore enabling gasoline demand to start normalizing. In fact, mobility data from Apple suggests that many parts of America have already recovered significantly over the past month, and states like Georgia and Texas have even returned to pre-coronavirus levels of highway and road traffic. Conditions are also encouraging overseas, with petroleum demand in China, India, Germany, and the United Kingdom all up sharply in recent weeks.
Sources: U.S. EIA, GasBuddy, Bloomberg, Apple Maps