Fuel Flash – September 2023

Early in August, oil prices jumped as Saudi Arabia once again extended their one million barrels per day cut into September. Signs continue to point towards another extension in October which will keep supply tight. Hurricane season is off to a fast and furious start with four storms in about a two-week period. The following graph shows the daily price movements over the past three months:

Around the midpoint of August, oil prices began to cool with news about China’s economic growth not being as strong as originally anticipated. With Labor Day approaching, we are also ending the summer driving season which typically reduces gasoline demand.

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

Retail and wholesale prices continued their increase from July into August for both diesel and gas. Diesel had a much steeper trajectory compared to gas. Diesel profit margins once again were falling with wholesale rising quicker than retail. Gas margins saw an increase as retail prices outpaced wholesale. The following graph shows the retail margins over the trailing 15 months:

Crack spreads had big gains in August, which is now the highest month year to date. As pointed out in previous months, spreads remain high by historical standards. See the trailing 15 months in the graph below:

Fuel pump prices continued their rise in August from last month. According to AAA, the national average gas price had a modest increase of about $0.06 to $3.82/gallon. Diesel prices had a gigantic increase of roughly $0.41 finishing at $4.45/gallon.

The first hurricane of the season, Hurricane Idalia, made landfall in the southeast at the very end of August. The later turned tropical storm’s path took it through northern Florida, Georgia, and into the Carolina’s before heading back out to the Atlantic Ocean. Fuel supply was disrupted in the southeast for a few days, but most major stations and suppliers were quickly back up and running. Oil prices ended the month just under $84/barrel as we headed into Labor Day weekend.

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