Inflation Nation

Photo by American Public Power Association on Unsplash

The U.S. and Europe look to re-open air travel on June 21 and increasing distillate demand expectations as the rest of the commodity complex looks undersupplied. Supply chain issues are creeping into sectors across the commodity space as a scarcity of supply suggests that our super-cycle call that we said was coming is here. From lumber to grains and now potentially oil and products, the commodity charts are off the map. In the U.S. demand is surging and that with the combination of a re-opening play in the UK is offsetting concerns about demand destruction in India and the worries about the return of supply from Iran. Besides that, Indian Prime Minister Modi is vowing to not shut down the Indian economy despite a lot of outside pressure to do so. Inflation is here in commodities and it is getting impossible to ignore.

What does this mean for gas prices? Well, we told you that America voted for higher gasoline prices when they voted for Joe Biden and he is making good on that promise. The summer driving season price jumps are happening as U.S. supply is below average and gas demand is getting ready to skyrocket. AAA reported yesterday that, "At the start of May, the national gas price average is $2.90, which is three cents more than a month ago. Pump prices in April saw minimal variability compared to March, which increased 15 cents from start to finish. Stable crude oil prices amid fluctuating demand helped keep the national average price jumps nominal last month. “While April saw minimal fluctuation, May is likely to see much larger increases alongside demand spikes, especially closer to Memorial Day weekend,” said Jeanette McGee, AAA spokesperson. “Compared to May 2019, U.S. gasoline demand is down only 4% and gas prices are on average just two cents more.”

On the week, the national average increased by two cents. Ten states saw averages increase between five and eight cents, but most states saw increases of one to three cents. The pump price changes come amid flux in supply and demand. For the week ending April 23, the Energy Information Administration reported gasoline stocks saw a small 100,000 bbl build to reach the 135 million bbl mark. That is the highest supply rate since the end of February and an 8.3 million bbl surplus compared to the same time two years ago. While supply increased, demand saw a decrease of 3% to 8.87 million b/d.

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