As supply and demand pressures start to influence gasoline, what lies ahead for the commodity and its ETFs?
The summer months are officially over, unemployment rates continue to creep up and consumers are holding onto their wallets. As a result, demand for gasoline has declined and continues to weaken. Nearly a year ago, gas prices were north of $4/gallon in certain parts of the nation, but today it’s a far cry from that. AAA recently announced that the national average for a gallon of gasoline is $2.46 and expected to keep declining.
From a consumer’s perspective, this is a good thing. For the overall economy, it is putting a damper on state jobs as many state Departments of Transportation bank on revenues generated from gasoline taxes.
According to Ashley Halsey III for The Washington Post, it isn’t necessarily a given that gasoline prices will continue to decline. Halsey states that if negotiations with Iran over its nuclear ambitions falter, the trend toward lower prices could reverse abruptly.
Regardless of what happens to gasoline in the future, one can play it either way. To go long on gasoline, one can utilize the United States Gasoline Fund (NYSEArca: UGA). The ETF is up 66% year-to-date and is flirting with its 200-day moving average.
To short the market, one can look at the ProShares Short Oil & Gas (NYSEArca: DDG), which is down 4.7% in the last month.
Kevin Grewal contributed to this article.