Gasoline Prices Drop For Third Straight Day Amid Broader Energy Slump

Gasoline prices are leading the energy complex lower for a 3rd straight day, dropping by more than a nickel in early trading and shrugging off inventory reports that showed stocks declined across the country last week. While diesel prices have been following gasoline’s lead lately and futures are still 6 cents above their lows for the year, spot prices in New York, Houston, and LA are all nominally trading at their lowest levels in 15-months this morning.

Meanwhile, you’d never guess that spot prices were so low if you just looked at rack prices across the southwestern US, where refinery maintenance and tight pipeline capacity has racks in El Paso, Albuquerque, Phoenix, and Las Vegas all still pricing in premiums of close to $1/gallon to their spot markets. Those tight supplies and huge price spreads are making long-haul options suddenly attractive, particularly now that carriers who had been facing driver shortages for years are suddenly finding themselves looking for ways to fill up their schedules.  

“We’re in a freight recession” JB Hunt offered the latest harsh warning for those hoping for a quick rebound in diesel demand while explaining the slump in the carrier's revenue and profits.  The silver lining in that statement is they are seeing prices start to level out after the sharp drop as demand for over the road deliveries for a variety of reasons. 

The interesting part of the diesel slump is that it’s not appearing to impact gasoline demand nearly as much, in a sign that we’re seeing consumers switching back to travel and events, after years of retail therapy while stuck at home caused a surge in trucking and diesel demand to meet package delivery needs. A big question for the next few months is whether or not this translates into a busy driving season, or if the diesel/trucking slump is the latest warning sign of the recession that just about everyone has been talking about for the past year. 

The API reported crude oil stocks dropped by 2.7 million barrels last week, despite another SPR sale of 1.6 million barrels, while gasoline stocks dropped by 1 million barrels and diesel dropped by 1.9 million. The EIA’s report is due out at its normal time this morning.

A Financial Times article this morning notes that India has overtaken China as the world’s most populous country with more than 1.428 billion people. For perspective, that’s a billion more people than are in the US. The outlook for China’s population declines due to decades of the one-child policy has numerous geopolitical and economic implications, not least of which is its status as the world’s largest oil buyer, while India faces challenges keeping its massive population happy and well supplied via fuel price controls.  

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