I noodled around with the recent monthly history of regular gas prices since 2000 and monthly performance of the Energy ETF XLE. As you can imagine, the two time series are correlated; as gas prices rise, so does the XLE. What was curious though was the recent large divergence between the increasing price of gas and the zooming performance of the Energy ETF.
The link to a spreadsheet with the data and a chart shows the story. Gas vs XLE, shows that over the last 24 months, from June 2006 to May 2008, gas prices have gone from $2.78 per gallon to $3.50 (the $4 stuff hit this month) - that's a 26% increase. But the XLE over that time has risen 60%. The prior 6 years show that gas and XLE trended in a narrow band together, so only recently has the relationship widened.
This time period is one where gas prices have risen and energy stocks have as well. Realize that the XLE could still rise even if gas prices fall - oil companies still make a profit with declining prices, they sell even more gas. So the positive correlation relationship over the last 8 years is somewhat temporal. Nonetheless, the recent excessive run-up in the XLE could bode for a near term reversal - either energy stocks will fade, or gas prices will rise even faster.
Another insight to this phenomena is the concept of hedging your energy exposure. By investing in some energy stocks, or the XLE for that matter, you can offset the rising out-of-pocket costs of filling your vehicle's gas tank through the profits in the investment. Lately, you would be even ahead given the divergence, but just as Southwest Airlines hedges their fuel costs, so can the average consumer - buy some XLE and worry a bit less about the pain at the pump.