Investors predict that gasoline prices in the US will continue to rise in the coming months.
Gasoline has emerged as the most attractive commodity in the oil complex as investors bet prices will rise further this year amid the US presidential and congressional elections in November.
Relatively low inventories, rising employment and strong household income growth are all factors boosting gasoline consumption and putting pressure on inventories, according to Reuters analyst John Kemp.
Kemp said that U.S. gasoline consumption is correlated with employment and household income, so the current increase in non-farm employment and wages is likely to drive strong gasoline consumption in 2024.
Domestic gasoline consumption in the United States has been trending down structurally since 2007 due to improvements in fuel economy, ethanol blending, and more recently the deployment of electric and hybrid vehicles. However, strong export growth, primarily to Mexico and other countries in Latin America, has helped offset lower domestic use, leading to higher overall refining throughput.
In addition, expected strong domestic consumption during the peak summer driving season could tighten cyclical inventories and put upward pressure on prices in 2024.
Additionally, refineries are at risk of disruption from hurricanes. Statistics show that nearly half of all U.S. refinery capacity is located along the Gulf of Mexico on the Texas and Louisiana coasts. Landing hurricanes pose an increased threat to Gulf Coast refineries.
Colorado State University researchers have predicted an “extremely active” hurricane season in 2024, with the number of storms expected to be 50% higher than the long-term average.
Meanwhile, as of April 5, U.S. gasoline inventories stood at 5 million barrels, below the 10-year seasonal average. Inventories stood at 7 million barrels at the end of January. But a power outage that shut down BP’s giant refinery in Whiting, Indiana, for more than a month in early February led to a sharp drop in inventories.
US retail prices (including taxes) average $3.54 per gallon in March 2024, up from $3.22 per gallon in January 2024 but still well below the high of $5.42 per gallon in June 2022 after the outbreak of the Russia-Ukraine conflict.
Fund managers are betting that gas prices will rise further for the rest of the year.
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