Energy

Why U.S Gas Prices Will Continue to Rise Rapidly

I appreciate the sincereity of the author, but there are a number of issues with this article and the results are quite misleading.

Futher, the article does not address the ever important concepts as to why cracks have fallen so hard, and why they are not likely to return at a rapid pace anytime soon. First, the refining cycle has been pushed too far by artificial demand pulls by MTBE phase-out, desufurization, etc. that are no longer prevalent.

Second, aggregate distillate inventories are the highest in well over a decade with deseasonalized demand down 5% YoY, causing the wholesale rack price to push while the price of crude is in a pull. We are seeing the same thing in Singapore "dirty" cracks, kerosene cracks, and heating oil cracks.

As for the comparison between XOM and cracks, its a strange analysis since only 23% of XOM's cash flow is from downtream activities and does not make sense. The R&M index peaked over a year ago, making the arbitrary correlation btw XOM and cracks spurious at best.