Let The Cuts Begin

We feel that we will rebound in the new year as we expect to get a deal done with China and expect that the government will soon reopen. US demand is strong and the drop in gasoline prices should give the economy a boost. We think the slowdown fears are overstated and expect a big rebound. 

Due to the holiday, reports will be released late. The American Petroleum Institute releases weekly data on U.S. oil inventories Thursday, the U.S. Energy Information Administration on Friday.

My Buddies at Gas Buddy are predicting that that 2019 will feature a yearly national average of $2.70 per gallon, representing a 3 cent drop versus 2018, but warns that the national average could surge to over $3 per gallon as soon as May.  Some of the highlights from GasBuddy’s 2019 Fuel Price Outlook include:

  • The nation’s yearly gasoline bill will fall to $386 billion dollars, a drop of $2.5 billion over last year as the average household sees their annual gasoline spending fall slightly to $1,991, down $25 from 2018.
  • The national average is forecast to rise as much as $1 per gallon from a low in January to a possible peak in May, but economic jitters could weigh heavily on where gas prices go in 2019.
  • Over 90% of the country’s largest metro areas are at risk for seeing average prices hit $3 per gallon, including Atlanta, Boston, Chicago, Los Angeles, Miami, New York City, Philadelphia, Phoenix, San Francisco, Seattle, and Washington, D.C.   
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Moon Kil Woong 1 year ago Contributor's comment

This market is quite interesting. Yes manufacturing is getting a pullback and the semi cycle is ending, however the US economy driver by mainly the service industry is still chugging along. This years winter driving and Christmas season oil usage is all up.

The author has a point that gas prices are still relatively high in the US. Sadly it is partially because of gas taxation. However, Exxon and companies processing oil to gasoline are probably doing well despite the drop in oil. Of course Exxon didn't get much of a rise when oil prices skyrocketed. So stability in this stock is more the key I guess.

The main point is the US is pumping as much oil as it can because small oil companies must cover cash flow and pump at a loss and will soon buckle. I don't expect the projection for massive increases in US oil output from here as some do. The oil price decline will only strengthen the case for reduced oil production growth from here on out. The oil price decline will hurt the US now rather than help it. This is a big change from the 1970s.