Fuel Flash – November 2023

Oil prices began October with a drastic dip, dropping to $82/barrel after hitting a high of almost $94/barrel in September. Prices would then surge with uncertainty in the Middle East as Hamas attacked Israel while OPEC+ once again decided to continue production cuts. The following graph shows the daily price movements over the past three months:

With turmoil in the Middle East, fuel prices were on quite the rollercoaster ride in October. After the initial attacks on Israel, there was a deadly blast at a Gaza hospital. Both sides pointed blame at each other for the strike. High risk of an extended or expanded conflict potentially causing supply disruptions raised significant concerns in the market sending oil prices higher.

The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

In October, diesel wholesale prices finally declined after surging since July. Retail prices declined as well, but at a slower pace, which resulted in rising profit margins. Gasoline wholesale and retail both plunged, but wholesale outpaced retail, resulting in large margins for gas in October. The following graph shows the retail margins over the trailing 15 months:

Crack spreads took another harsh dip in October, recording their lowest mark since December 2022. See the trailing 15 months in the graph below:

According to AAA, the national average gas prices tumbled during October. Gas prices finished at approximately $3.48/gallon, a decline of $0.34/gallon. Diesel prices were down another $0.10 compared to September finishing at $4.46/gallon in October.

Even with the on-going conflict in the Middle East, oil prices finished October basically at where they started, just above $81/barrel. The unknown of what will happen next might cause sudden spikes, but the other factors seem to be outweighing those negatives. Despite OPEC+ continuing to retain production cuts, global economic growth being weak has kept a cap on how high oil will go.

Sokolis Group will continue to monitor the many factors going into fuel prices. We currently anticipate that oil prices will range between $80-90/barrel.