Looking Ahead – The Weekly Petroleum Inventory Reports

…Like many (but not all) of you, I have been struggling to understand how RBOB could be down so much with prices at the pump higher and refinery shut downs. One possibility is that we are receiving as-yet-unreported gasoline tanker shipments from overseas to compensate for our downtime. A more likely explanation however, is that gas station owners have been receiving less gas. Given a choice to buy cash gasoline at $1+ above futures and thus risk getting accused of price-gouging, it would be rational instead to buy smaller amounts of product (intentionally or otherwise) and ration/shut pumps down so as to not lose money. (the station owners would then lose money by selling fewer cupcakes and beef jerky etc. as gasoline is essentially a loss leader). So given the Mastercard report above, it is possible that gasoline stations are restricting how much they sell while at the same time showing a higher price. This dynamic would show up nationally as gas pumps being empty at sky high prices, but actually less ‘demand’ than the prior week or YoY comparisons. (Note this may be one example of where ‘demand’ exceeds ‘consumption’.)


Diesel (distillate) is another story – we are a LARGE exporter of diesel and increasingly so – One could surmise, (based on todays trading n=1), that the price elasticity of diesel is much lower than that for gasoline, and a good deal of this comes from abroad, meaning that distillate crack spreads should recover sooner than RBOB.

There also may be quite a bit of volatility following the next few weeks of DOE inventory reports depending on the timing of tanker shipments. 1 VLCC tanker can hold 2 million barrels (about 15% of our daily imports) – whether one tanker is counted this week or next is the kind of thing that has large potential to swing the weekly numbers. One thing I will note – if RBOB prices are ‘correct’ and gasoline demand is really going to continue to drop, then some retail and gas-station stocks are about to see less traffic, which has economic implications.

The Oil Drum