The Phil Flynn Energy Report
Inflation Nation
The U.S. and Europe look to reopen air travel on June 21, increasing distillate demand expectations as the rest of the commodity complex looks undersupplied. Supply chain issues are creeping into sectors across the commodity space, as a scarcity of supply suggests that the supercycle call that we’ve long anticipated is finally here.
From lumber to grains, and now potentially oil and products, the commodity charts are off the map. In the U.S., demand is surging and that, along with the combination of a reopening play in the UK, is offsetting concerns about demand destruction in India and worry about the return of supply from Iran. Besides that, Indian Prime Minister Modi is vowing to not shut down the Indian economy despite a lot of outside pressure to do so. Inflation is here in commodities and it’s getting impossible to ignore.
What does this mean for gas prices? Well, we told you that America voted for higher gasoline prices when they voted for Joe Biden, and he’s making good on that promise. Summer driving season price jumps are happening as U.S. supply is below average and gas demand is getting ready to skyrocket. Yesterday, AAA reported the following:
At the start of May, the national gas price average is $2.90, which is three cents more than a month ago. Pump prices in April saw minimal variability compared to March, which increased 15 cents from start to finish. Stable crude oil prices amid fluctuating demand helped keep the national average price jumps nominal last month.
“While April saw minimal fluctuation, May is likely to see much larger increases alongside demand spikes, especially closer to Memorial Day weekend,” said Jeanette McGee, AAA spokesperson. “Compared to May 2019, U.S. gasoline demand is down only 4% and gas prices are on average just two cents more.”
On the week, the national average increased by two cents. Ten states saw averages increase between five and eight cents, but most states saw increases of one to three cents. The pump price changes come amid flux in supply and demand. For the week ending April 23, the Energy Information Administration reported gasoline stocks saw a small 100,000 bbl build to reach the 135 million bbl mark. That is the highest supply rate since the end of February and an 8.3 million bbl surplus compared to the same time two years ago. While supply increased, demand saw a decrease of 3% to 8.87 million [barrels per day (bpd)].”
Media reports surfaced that a shortage of fuel tank truck drivers may impact gasoline availability this summer. [Grady Trimble and I covered this yesterday on Fox Business.] As gasoline demand increases, gas stations are working to adjust delivery schedules to keep pace. However, deliveries may be delayed in a small number of markets this summer, causing select stations to see low-to-no fuel at some pumps for short periods, possibly 1-2 days.
“With road trips expected to be popular this summer, some summer travel destinations, like beaches or mountains, may see some pumps affected. It is important to understand this is not a market-wide impact. Gas can be found at other stations within a market,” said McGee. “The U.S. is not looking at a gas supply shortage; there is ample gasoline supply across the country. It is just a matter of more frequent deliveries to stations to meet demand.”
In markets where this happened last month, it was contained within a brand/chain at a select number of pumps. As a rule of thumb in general, AAA recommends that motorists consider filling up when their fuel level hits a quarter of a tank.
The nation’s top 10 largest weekly changes: Indiana (+8 cents), Illinois (+8 cents), Washington (+6 cents), Oregon (+6 cents), Alaska (+5 cents), California (+5 cents), Utah (+5 cents), North Carolina (+5 cents), Ohio (−5 cents) and Hawaii (+4 cents).
The nation’s top 10 least expensive markets: Mississippi ($2.57), Texas ($2.57), South Carolina ($2.60), Louisiana ($2.60), Alabama ($2.63), Oklahoma ($2.66), Missouri ($2.66), North Carolina ($2.67), Arkansas ($2.67) and Tennessee ($2.69).
And while Grady Trimble of Fox Business interviewed me at the Hinsdale, Illinois oasis yesterday, we saw the price increase by 6 cents while we were standing there— and that's just the beginning. Top off your tank off to save a few bucks.
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