The latest data from the U.S. Energy Information Administration (EIA) showed that on Monday the average cost for Regular gasoline in America fell to $2.20 per gallon. That was the 11th weekly decline in the past thirteen weeks and it left the price consumers are paying at the pump more than 8 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 South Carolina, where a gallon of Regular costs just $1.91 on average. Residents of California as usual have to pay the most in the continental U.S. for Regular ($2.75/gallon), and San Francisco is again the city with the nation’s highest average price ($2.92/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 dipping below $40 per barrel in August.
Current gasoline prices, though, are actually more than 2-percent higher than they were just a few weeks ago as another short-covering rally and supply concerns caused oil to spike earlier this month. However, crude prices have already started to pullback some as fundamentals appear less supportive of another sharp move higher in the near future. For example, data from Baker Hughes showed that the number of U.S. oil rigs in operation has increased for eleven straight weeks, implying the potential for greater upward pressure on oil and gas supply. Further, hedge funds and other money managers this month have started to reduce their bullish bets on oil, with their combined net long position in the three major Brent and WTI futures and options contracts being slashed by 80 million barrels just in the week ending September 6th. This could be partially due to profit taking but with long positions still relatively high and short positions relatively low, according to John Kemp of Reuters, “there is potentially scope for the correction to continue.” Such short-term fluctuations have not had a marked effect on Americans’ driving habits (last chart above), and data out tomorrow on retail sales will show whether the price swings at the pump have influenced broader consumer spending.
Sources: U.S. EIA, DShort, GasBuddy, Bloomberg, Twitter, Reuters, CME, ICE, CFTC
Post author: Charles Couch