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Happy Memorial Day Driving With the Price of Gasoline at a New Record High

May 29, 2022

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6:51 pm

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19 comments

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Economics

According to the AAA the Average National Gasoline Price hit a new record high on Memorial day, typically the heaviest weekend for automotive driving.

Gasoline Price Details

The average price per gallon is a record high $4.160.
California leads the way with an average price of $6.139.
The average price in Mono County, California is $7.032.
The average price is above $4.00 in every state.
Wisconsin has the lowest average at $4.379.

West Texas Intermediate Crude

West Texas Crude chart courtesy of StockCharts.Com

The price of crude peaked in the US at $147.27 in 2008. The price now is $115.07.

This has economic illiterates like Elizabeth Warren and President Joe Biden complaining about gas price gouging.

But crude is just an input to gasoline prices. Refining, transportation, the price of chemicals, and regulations come into play.

Unleaded Gasoline Futures

Unleaded Gas Futures courtesy of Barchart.Com, Annotations by Mish

Factoring in refining, transportation, the price of chemicals, and regulations, it’s no wonder gasoline prices are at record levels although crude itself isn’t.

The chart is interesting for other reasons. Normally, the managed money crowd are trend followers. They rides waves up until they crash. Here, managed money moved to the sidelines despite rising prices.

This is bullish in isolation. But we must also factor in crude futures positioning.

Crude Futures

Managed money largely got shaken out of crude futures as well.

Long liquidation reversals are always a risk, but speculation looks relatively tame. This setup provides less fuel for a cheap sustained plunge.

Oil Looking Bullish, President Biden, PM Boris Johnson, and EU Looking Foolish

The technicals, fundamentals, and politics make for an interesting oil and energy setup.

For further discussion of oil prices including inane political responses, please see Oil Looking Bullish, President Biden, PM Boris Johnson, and EU Looking Foolish

This post originated at MishTalk.Com.

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19 Comments

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Oldest Most Voted

AWC

4 years ago

Gas price hasn’t really gone up much compared to 1964. The dollar’s purchasing power has gone down. Based on ‘64 real (silver) dollars, gas is still 25 cents a gallon.

ColoradoAccountant

4 years ago

In 1896, 75,000 horses disappeared from the streets of Philadelphia. The new Safey Bicycle (chain drive, not penny faring big wheel) was taking over. Lots of electric big wheel bicycles ridden by old people around here, but it is summer almost. Park the car in the Harvard Yard.

prumbly

4 years ago

Reply to ColoradoAccountant

Did the 1896 government subsidize bicycles and have policies to hamstring the production of horses?

ColoradoAccountant

4 years ago

Reply to prumbly

Horses made an incredible amount of noise with their metal shoes on the cobblestone. The city employed street sweepers with shovels to scoup up the manure. People were happy to see the horses go, they are high maintenance. Only little girls ride horses now, the cowboys here use ATVs.

Lisa_Hooker

4 years ago

Reply to ColoradoAccountant

Yup, girls still ride horses for pleasure, always will.

Robbyrob

4 years ago

Why the Fed wants corporate America to have a hiring freeze

https://finance.yahoo.com/news/why-the-fed-wants-corporate-america-to-have-a-hiring-freeze-morning-brief-100055174.html

Casual_Observer2020

4 years ago

Reply to Robbyrob

The cat is out of the bag with some companies raising base compensation by 50%. This means the top 20% of income earners will just pay market prices. The Fed is late as usual. The way to prevent what has happen would have been to start raising rates in 2021 after covid vaccines allowed the economy to open up. Powell now needs high wage earners to now be laid off in order to slow down inflation and bring down prices.

RonJ

4 years ago

Reply to Casual_Observer2020

“The way to prevent what has happen would have been to start raising
rates in 2021 after covid vaccines allowed the economy to open up.”

The economy never needed to be shut down. Covid was treatable in March 2020. Dr. Zelenko proved it. It was the public health agencies that had an obsession with mass vaccination, that caused the mess we are in. They obstructed anything that got in the way. Hundreds of thousands died as a result. The economy was screwed over as a result. Government caused this, not the virus.

Lisa_Hooker

4 years ago

Reply to Casual_Observer2020

There aren’t enough high wage earners to make a difference.

Felix_Mish

4 years ago

And where are the shouts of joy that the bulk of humanity has gotten rich enough to afford roads, cars, buses, and trucks? Funny how these things are extra-desired soon after a world-wide virus attack. Those pesky other people with their déclassé greed. Yuck.

Felix_Mish

4 years ago

Wait for predictions of “Oil – $200 plus!!!” That prediction is the usual high-point marker.

PapaDave

4 years ago

Reply to Felix_Mish

There are always a lot of predictions. I have seen them ranging from $50 to $220 by the end of the year. Take your pick.

Oil companies will be very happy in the $100 to $115 range.

But oil is just one component of the price of gasoline.

The fact that there is less refining capacity to produce gasoline means that inventories will keep dropping as long as demand remains high. Which means even higher prices to bring the market into balance.

Casual_Observer2020

4 years ago

Reply to Felix_Mish

Reminiscent of 2007.

PapaDave

4 years ago

US Refining capacity for gasoline is down by 1 mbpd (11%) as older, uncompetitive oil refineries have been shut down over the last few years. No one noticed at the time as demand dropped because of the pandemic. Now demand is getting back to normal and we no longer have enough refining capacity to meet that demand.

And no one wants to spend big bucks to build a modern refining facility that takes 20 years to pay back the investment, when we may be using far less gasoline, etc in 10 years time. Not to mention the NIMBY protests, and environmental activists doing everything they can to stop it. Better for the refining industry to just keep the status quo and let prices keep rising until demand drops to match supply.

I wonder how high gasoline prices will have to rise for the supply/demand equation to get back into balance?

Casual_Observer2020

4 years ago

Reply to PapaDave

Refiners shut down and laid off all workers in 2020. They haven’t been able to turn on operations and hire those people back very easily. A lot of refining capacity has never returned. If it did then prices would come back in line with 2021 numbers prior to Russia invading Ukraine.

PapaDave

4 years ago

Reply to Casual_Observer2020

Yes. Some refineries shut down temporarily and are struggling to reopen. Others shut down permanently. According to this article, 5 refineries closed down permanently in the US in 2020.

The same thing is happening in other countries. And there is a reluctance to spend big bucks to build any new refineries in an era where oil use will eventually decline (maybe by the next decade?).

And even if companies committed to build new refineries, permitting and construction make it a 5+ year project.

Meanwhile, demand continues to stay strong, despite rising prices. The forces in play will continue to favor rising prices.

https://www.separo.com/separo-blog/why-are-oil-refineries-closing

shamrock

4 years ago

People like to complain a lot about the price of gas, but is anyone actually changing their behavior? Doesn’t seem like it to me. AAA estimates an 8.3% increase in memorial day travel over last year even though everything is 50% more expensive.

Zardoz

4 years ago

Reply to shamrock

Americans are entitled to burn as much fuel as their credit limit will allow. Christmas may be a bit threadbare this year though.

Rbm

4 years ago

Reply to shamrock

Wonder if its up because covid lowered travel.

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Happy Memorial Day Driving With the Price of Gasoline at a New Record High

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