Fear and Fleet Fueling Prices

We all know that fleet fueling prices have gone up. We see it everyday at the pump. We feel it in our wallets. But why? Is it because of supply and demand? Is it because of volatility in the Middle East? Just what exactly is driving diesel and gasoline prices higher? It’s simple. The way this fleet fueling professional sees it, it’s all because of a four-letter word that begins with F.

FEAR. And looking ahead, most people may be afraid that fuel prices will continue to increase. It is hard to predict just exactly where they are headed. But I’m going to go against the norm and say that fuel prices will go down. And I’ll tell you why.

Not knowing the certainty of what the future holds, we can look to our current and past trends for a glimpse of what may happen. Americans have been bullish on fuel since the middle of last year. There is always a demand for fleet fuel, but Americans are already slowing down on the amount of gas they are buying. In the past, experts have reported that when gas hits $4 a gallon, there is a psychological trigger for average Americans to change their buying habits. New statistics show that even at $3 a gallon people are driving less. So with current prices averaging about $3.50 a gallon, people are continuing to scale back their time behind the wheel. Less driving and fewer purchases at the pump leads to an increase in our domestic surplus. Keep in mind that the summer driving season is on its way and that means gas prices usually go up. I’ve also noticed that the amount of money being traded in the futures markets is about half of what it was a couple of weeks ago. This tells me that a lot of buyers looking for a quick upswing have enjoyed their upswing and are now getting out.

“Fear tends to manifest itself much more quickly than greed, so volatile markets tend to be on the downside. In up markets, volatility tends to gradually decline.” – Philip Roth, American Novelist

And, I’m not alone in the Fear-Factor-Theory. There has been a view amo aaam that the crude oil market has $10 to $30 built into it based on fear and speculation. As always, I will continue to monitor and analyze the global and domestic industry factors and modify views as information changes. With what we have in front of us now, I see crude oil going under $100 by the middle of April and down to the mid $90’s by May. This will drive down diesel fuel prices and gas prices. By the middle of the July when the summer driving season is already over from the refining and distribution perspective, I think we could see prices drop into the upper $80’s a barrel. This could bring prices back to $3.30 a gallon for diesel fuel and $3 a gallon for gasoline in most parts of the country.

Inventory numbers released on Wednesday by the Department of Energy show a build up in crude oil again and gains in diesel fuel while gas inventories went down slightly, but almost 1.9 million barrels less than expected. China tightening its monetary policy to try to curb inflation in that country is another sign of fueling demand possibly going down.

Trades, speculators, and investors…no one wants to be on the short side if more crazy things happen in the Middle East. I say, the Middle East is the Middle East. We’ve got fuel inventory, supply is not a problem. So stop worrying and get back to reality, prices will go down. Don’t be afraid!

They won’t stay down forever of course. In the real world, demand will pick up and supply at this point will have a hard time keeping up. But we are still six months away from that.

Be brave, be bold! It’s going to get better.