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Gasoline price spikes on lower supplies; will add to consumer woes

By Sober Look

The US consumer can’t catch a break. As if rising food prices weren’t enough – with corn prices at record highs and other food prices expected to move higher next year – we now also have a sharp increase in gasoline prices.

US gasoline inventories have declined more than expected – close to the lower end of the 5-year range.

Source: EIA

And US crude oil stocks also came in below the forecast (though still above the 5-year range).

Source: EIA

That sent gasoline prices sharply higher. NYMEX Futures have now retraced most of the spring 2012 declines.

Gasoline active futures contract (source: Bloomberg)

Bloomberg: – Gasoline futures jumped to a 14-week high on lower inventories, higher demand and rally in Brent crude oil.

Futures gained 2.3 percent as the Energy Department reported gasoline supplies dropped 2.37 million barrels to 203.7 million, the lowest level since the week ended June 15 and the lowest for this time of the year since 2008. Wholesale demand jumped to a 13-month high. Rising Brent prices increased the price of imported crude and gasoline.

“Combine that storage report with the strength in Brent today and you get a 5-cent move,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

Rising food and gasoline prices may materially dampen consumer confidence and push the "headline" CPI number to uncomfortable levels. High fuel costs will also impact the Eurozone, deepening the recession in a number of nations (next post).

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Sober Look is a no-hype financial markets/macro blog that typically relies on data analysis, primary sources, and original materials. We keep it concise, to the point, with no self-promoting nonsense, and no long-winded opinions. If you are looking for Armageddon predictions or conspiracy theories, you will be thoroughly disappointed. Topics include financial markets, banking, asset management, risk management, derivatives, global economy, policy, and regulation, with the emphasis on finance education. Follow him on his blog or twitter.

1 Comment

  1. David_Lazarus says:

    High Fuel costs will have a significantly weaker impact on Europe as opposed to the US. In the US any increase in fuel flows straight through to the price at the pump. In Europe we have a significant tax which could be frozen to reduce the impact on the consumer or even cut if necessary. So it will always be the US that feels the pain of fuel crises. Europe and Japan are significantly more efficient in the GDP generated from each barrel of oil, than the US.