Gasoline Tops $4.00 A Gallon

Gasoline stations in California have been seen selling gas for as high as $4.00 per gallon, which has been the highest price for west coast consumers this year. The remaining areas of the U.S. seem to be in the clear, with forecasts for the rest of the country to barely reach $3.00 per gallon.  Refinery maintenance is largely to blame, as refineries switch from the winter gas blends to the summer blends, causing consumers to gobble up the near term supply.

The Federal Reserve came out Wednesday with comments about the rising Consumer Price Index, (CPI) blaming the 3.5% rise in energy prices in March, led by gasoline prices surging 6.5% last month, its biggest gain since the third quarter of 2017.  According to statistics from AAA, gasoline prices were up .20 cents from last month, with a national average of $2.78 per gallon.  West coast prices were much more elevated, with an average of $3.91 per gallon, which is up a whopping .60 cents from last month, with some counties in Northern California seeing prices as high as $4.55 per gallon.

Along with refinery maintenance, gasoline prices have gotten a lift from flooding in the midwest, which is having an impact on the prices of ethanol.  The confluence of both events is causing gasoline supplies to bottleneck, causing a short term rise in gasoline prices.  Most energy analysts are not expecting gasoline prices to stay elevated into the summer driving season. However, if there is volatility in the late summer months due to the hurricane season, we could see gasoline prices tick higher.

Gasoline futures (commonly referred to as RBOB futures) started off 2018 with a gradual rise in prices, which peaked late in the second quarter of 2018.  Gasoline futures put in another lower high in October of 2018 before breaking a short term trend line and crossing below the 100 and 200-day Moving Averages.  RBOB futures then broke below the low from 2018 of around $1.80 cents and proceeded to move lower over 30%, sending the prices of gasoline to their first oversold condition in the RSI in over 18 months. (Identified by the purple square on chart)

In the start of 2019, RBOB futures put in what is commonly known as an inverse head and shoulders reversal pattern.  Gasoline prices began to move higher, ripping through the neckline of the inverse head and shoulders pattern and moving above both the 100 and 200-day Moving Averages once again.  Currently, RBOB futures are up over 50% since the start of 2019.

Gasoline futures have had a strong start to 2019, which has put pressure on consumers wallets.  Refinery maintenance season will be winding up soon which will help ease some supply concerns for the west coast.  Hopefully, lower prices in RBOB futures will come quickly giving some much-needed relief to prices at the pump.

 


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