Four Things Fueling the Gasoline ETF Rally

Mar. 2.10 | About: The United (UGA)

Here we go again. In just a few months, the summer driving season will kick off and millions of drivers will wonder how much they’ll shell out for gas this year. While gas prices are getting higher, the exchange traded fund hasn’t followed suit…yet.

Gas prices are beginning their march back toward $3 a gallon, but strangely, it’s not being driven by American consumption.

Experts predict that the average price for a gallon of gas will surpass $3 by this summer and will top out somewhere around $3.25, although they will not climb to the absurd levels seen two summers ago, reports Stephen Markely for Kicking Tires. If the global recovery sustains itself, prices could surge even higher. What gives? A few things.

  • It’s in part related to the type of crude oil being used to manufacture gas.
  • You can also count on one of the usual suspects: Chinese demand.
  • James Cordier and Michael Gross for MarketWatch report that it’s all just part of a pattern; price spikes typically precede actual consumer demand. Right now, demand is all on the wholesale level.
  • Consider the time of year, too. In late January/early February, refineries begin to shut down for maintenance as they switch over from distillate production to focus on unleaded gasoline production. A reduction in production simply minimizes short-term supply.

For more stories about gasoline, visit our gasoline category.

  • United States Gasoline (NYSEArca: UGA)