The gasoline market is in deep glut, not from high production but from low demand. U.S. refiners have now shut in more than one-fifth of total capacity, much of it due to inferior sales, not operational glitches. Four refineries are shutting down completely.[image-nocss]
And the glut may well worsen before it starts getting soaked up: Employment continues to shrink, cutting gasoline demand, and now that the retail price is a 69-cent premium over the year-ago price, motorists will buy even less. In December, the price will "feel" even higher vs. last year, because December 2008 prices were crashing. All this during the normal seasonal gasoline demand shrinkage that will continue as usual next month and is at its most extreme every January.
In the next few weeks, demand's poor performance can be expected. Not so with crude-oil prices and gasoline supply. Crude oil might well exhibit plenty of strength, depending on the degree of concern investors have about the weak U.S. dollar (and potential resiliency of demand in developing nations). The glut of gasoline might well ebb, if U.S. refiners have to reduce runs further or more of them close up shop.
But chances are that even if crude-oil prices edge back up and refining capacity use worsens, the gasoline glut will weigh heavier, cutting prices.
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