One of the things I hate is paying a lot of money for gas. The only thing that makes it less fun to pump gas is having to do it in cold weather, which I’m personally getting really tired of. Luckily it appears we might be seeing some hope for gas prices to ease up in the next few weeks. Below we have a chart of unleaded gasoline. No, this isn’t the cost of what you’ll see at Shell or BP but this shows the actual commodity price of spot unleaded gas.
The recent rise in spot gasoline prices has taken us to the previous resistance around the $3.05-$3.10 area back in August and September. This level also happens to be the 61.8% Fibonacci retracement level. As always when we find a price hitting support or resistance we turn to our trusty RSI indicator to check in on momentum. In the case of unleaded gasoline it appears momentum has put in a slight negative divergence – making lower highs while price consolidates.
I’m at about three-fourths of a tank right now and I’m interested to see if gasoline prices will be lower by the time I need to fill up. It appears that might be the case but I will be keeping an eye on resistance and see if gas does in fact get above $3.10.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.
I’ve talked the price of gas a few times (here, here and here) during its recent decent. James Hamilton who is the professor of Economics at the Univ. of California in San Diego recently discussed the price of gasoline and its relationship to Brent crude on his blog Econbrowser, except below.
From James Hamilton:
The price of gasoline and price of Brent turn out to be cointegrated, meaning that any permanent change in the price of Brent eventually shows up as a permanent change in the price of gasoline. The coefficients of the above relation are very much what you’d expect. A barrel holds 42 gallons, and the estimated coefficient (0.025) is 1/40. The intercept (0.84) captures an average state and federal tax of 50 cents per gallon plus a bit over 30 cents in markups and other costs.
With Brent on Friday at $91.50 and an average retail gasoline price about $3.47, we’d thus expect gasoline prices to come down another 35 cents a gallon or so from where they were on Friday. Historically those adjustments usually come pretty quickly. For example, last December U.S. gasoline prices temporarily fell about 25 cents/gallon below the long-run relation, but by March they were right back on track.
If gasoline prices do fall from their value in April near $3.92 to $3.12, that would be an 80 cents/gallon swing. With Americans buying about 140 billion gallons of gasoline each year, that translates into an extra $112 billion over the course of a year that consumers would have available to spend on other things besides gasoline.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer.