Unleaded Gasoline Futures Suggest The Price At The Pump May Have Peaked

By Mish Shedlock of MishTalk
Wednesday, June 22, 2022 5:21 PM EDT

(Click on image to enlarge)

Unleaded gasoline futures courtesy of Trading Economics 

Unleaded gasoline futures courtesy of Trading Economics 

Unleaded Gas Futures 

  • Peak Price $4.276 on June 9
  • June 22 Price $3.824
  • Decline $0.452

The futures price has fallen about 45 cents. Let's see what pump prices are doing.

AAA National Gas Prices 

Gasoline prices courtesy of the American Automobile Association

Gasoline prices courtesy of the American Automobile Association

Synopsis 

  • Prices at the pump peaked on June 14, five days after the futures price peaked.
  • Despite futures falling 45 cents, the price at the pump has only fallen 6.1 cents from $5.016 to $4.955. 
  • California has the highest prices in the nation. The Mono County price is $7.231. Alpine County has the highest price in the nation at $7.799. Ouch!

I am surprised Elizabeth Warren is not moaning about this. It means she is not following the futures price. 

But this lag standard behavior. Stations filled up at higher prices and have to sell at higher prices. Other expenses, especially the cost of labor, have not fallen.

While prices may have peaked, don't expect too much relief at the pump unless futures prices fall even more. 

No Relief for Truckers 

Diesel prices are still rising. This reflects refining issues and crack spreads . Crack spread refers to the pricing difference between a barrel of crude oil and its byproducts such as gasoline, diesel, heating oil, and fuel oil. 

One barrel of oil does not translate into one barrel of gasoline. Output depends on the refinery and the grade of oil used as input. During the summer, there is a higher demand for gasoline and diesel.

Biden's decision to mandate more ethanol also enters into play. The net effect or that decision was to make refining less profitable for many small refiners. 

Guess what? Refiners will not produce at a loss, so refining capacity comes offline.  

Biden repeatedly calls on refiners to produce more while simultaneously promising to drive them out of business.

Biden Goes After Marathon, Chevron, Mobil, BP, Valero

On June 15, President Biden Criticized Marathon Petroleum Over Excess Profits.

In response Chevron CEO Fires Back at Biden, Slams ‘Political Rhetoric’ in New Letter

Flashback

Refiners Respond

Upstream reports US majors respond to Biden’s letter by calling out federal policies

  • Chevron stated: “Unfortunately, what we have seen since January 2021 are policies that send a message that the Administration aims to impose obstacles to our industry delivering energy resources the world needs.”
  • Shell said in a statement to Upstream it is producing at full capacity in the US and is looking into delivering more energy products to customers in the US and abroad.
  • ExxonMobil said in a release it had increased refining capacity by about 250,000 barrels per day since the downturn, the equivalent of a medium-sized refinery, but called for government action. “In the short term, the US government could enact measures often used in emergencies following hurricanes or other supply disruptions — such as waivers of Jones Act provisions and some fuel specifications to increase supplies.”

Dear President, Look in the Mirror

Biden repeatedly blames Putin. He needs to look into a mirror.

Why Are Energy Prices High? Blame President Biden

Thanks to Biden, don't expect massive relief at the pump unless and until the Fed acts enough to bring demand down much more than it has.

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