Something's Smelly: Gas Prices Should Soon Reverse
Source: Michael Filloon, Seeking Alpha (6/13/08)
As a general rule, when gas goes up, refiners go up unless there is a major spike in oil prices. The refiners continued to sell off as traders got a second wind in the afternoon. This decoupling is beginning to show a last stand of gasoline bulls.
Even more important were the unemployment numbers that came out on Thursday. For every person that loses their job, that is one less vehicle commuting to and from work everyday. This is very important and makes gasoline a very good buy on the hike upwards yesterday. Gasoline has been following the price of oil on the way up, but it is starting to feel like there may be a top. The summer driving session kicked off this year with an unexpected jump in gasoline inventories and last Wednesday followed with the same type of numbers.
If we look at overall gas pricing and the way it is traded, generally gasoline starts to hit a top in the summer. This may not be a typical year but if you are in for longer than a few months and history repeats itself, you could make some money.
Another strange occurence was the refiners not trading along with the price of gasoline. As a general rule, when gas goes up, refiners go up unless there is a major spike in oil prices. The refiners continued to sell off as traders got a second wind in the afternoon. This decoupling is beginning to show a last stand of gasoline bulls. Since inventories were added during what was suppose to be the busiest travelling weekend of the year, it would stand to reason that other holidays such as the Fourth of July will be the same...
Even if the price of oil goes higher on demand from emerging markets, gasoline will decouple from the trade and decrease in price. It seems at this point with the mortgage crisis and the high price of oil, the Fed will continue to do nothing for a while unless there is a major problem within the US market.