Kick Consumers While They're Down: Oil and Gasoline Diverge

In today's Ahead of the Tape column in the Wall Street Journal, Mark Gongloff focuses on the fact that gasoline prices have stopped going down for the time being. This is highlighted perfectly by looking at the price charts of the oil and gasoline ETFs.

In the first chart below, we provide a one-year chart of USO (oil ETF) and UGA (gasoline ETF). Even as oil prices have continued to fall in recent weeks, gasoline has diverged and gone higher.

The second chart looks at the year to date change of the two commodity ETFs. As shown, USO is down 23% year to date, while UGA is up nearly 23%. This divergence is not what the consumer needs right now!

Comments

[Jerry Moore:]

Yeah, I'm sure that a lot of people have noticed the same thing. The question is, "Why is it happening?"

Feb 12 03:17 PM

[bedfordj:]

Silly boy--the consumer is getting screwed again. The oil companies need their profit.


On Feb 12 03:17 PM Jerry Moore wrote:

> Yeah, I'm sure that a lot of people have noticed the same thing.
> The question is, "Why is it happening?"

Feb 12 03:27 PM

[Jolly_Rancher:]

Could it be that the price of gasoline is experiencing a "fluctuation"? The same thing happens in the stock market which economists like to call "efficient."

Feb 12 03:31 PM

[turb0kat:]

Crack spreads (for refining oil to gasoline) have returned from NEGATIVE to more normal ranges. This is part of the result of that. I wish I would have thought of betting the spreads this way.

Feb 12 03:45 PM

[Jason Rines...:]

And the government gets the gas tax. So why is that happening? Because the taxpayer will pay the entire tab for last year's Treasury looting and this year's moronic spending package and idiotic leadership appointments who failed at Efficient Market now onto the extraction of wealth from all taxpayers.


On Feb 12 03:27 PM bedfordj wrote:

> Silly boy--the consumer is getting screwed again. The oil companies
> need their profit.

Feb 12 03:48 PM

[doug:]

maybe my logic is flawed, but wouldn't you expect the refiners to be able to react quicker to gasoline demand than exporters of crude are able?

Feb 12 04:34 PM

[chopshop:]

the rise in inventory and the increase in gas prices highlight the refineries inefficiencies. Will Obama stimulate the refineries?

Feb 12 05:13 PM

[bc818:]

Did someone say ideal pair trade? Short UGA while going long USO.

Feb 12 05:44 PM

[chopshop:]

Fine for very short term if that. The price of gas will not defy a rising oil price.

Feb 12 07:23 PM

[ROLEX18:]

Consumer will always get the worst deal, this is the principles of capitalism, Oil companies have more lobby than some squeezed consumer.
If you think it's not fair, consider changing the country, maybe Venezuala or Indonesia? Gasoline is cheap there.

Feb 13 07:44 AM

[sunbakd1:]

I agree 100%. Refineries were loosing money hand over fist to produce gasoline when the cost of oil was over $100 per barrel. Now, it is their time to recoup losses.


On Feb 12 03:45 PM turb0kat wrote:

> Crack spreads (for refining oil to gasoline) have returned from NEGATIVE
> to more normal ranges. This is part of the result of that. I wish
> I would have thought of betting the spreads this way.

Feb 13 10:42 AM

[gokou3:]

Could contango on oil futures play a role in USO underperformance?

Feb 13 12:59 PM

[jksisco:]

Emotional sentiments aside, refineries, whether independently owned or company owned aren't going to be run at 100% capacity when demand is low. Everyone likes Oil to be a whipping boy regardless of the price, just human nature I guess. Not to rationalize, but, Americans pay much less for gallon of gas than a large portion of this world. To hedge yourself against high prices invest in a well, oil stock, or demand that Congress allows more drilling.

Feb 13 06:44 PM

[classicride72:]

Gouging is a better word. West Texas Intermediate crude is $35-40 bbl yet gasoline prices in El Paso and New Mexico are as high as areas that use higher-priced crude. I could buy regular unleaded for $1.50 gallon in Albuquerque before gouging began and West Texas Intermediate was about same price as current. Now $1.95 gallon is a more average price and it's still rising. Gouging will continue unless people stand up and demand an end to it.

Feb 15 06:39 PM

[gediminas:]

I'm new to evaluating graphs, so tell me if I am wrong, but don't oil companies set a barrel price that they need to make profits? As in, Exxon would decide they need to sell barrels at $50 to run all their operations and R&D?

Feb 16 12:33 AM