As of late, oil and gasoline have been virtually tied to the Dow as we look to economic woes as reasons to sell-off gasoline and oil contracts. With the Dow finally putting together a noteworthy rally, gasoline and oil both surged.
With a gain in wholesale prices along with much tighter Midwest supplies, we can expect our first price hike in weeks. The tightness in supplies is mainly due to refinery woes later this summer, combined with planned fall maintenance led to a large loss in inventories. Usually when this happens, refiners will direct products to the Midwest to take advantage of larger margins. However, coupled with Gustav and Ike, refiners were too busy directing fuel at the South, especially TN and GA as large shortages increased margins.
Fuel out of Chicago is now pegged roughly 40-cents over the NYMEX trading price, bringing us to a $2.35 wholesale cost before shipping and taxes.
I would fuel up very soon and take advantage of anything under $3, knowing that a hike would be to $3.19-$3.29.
Hopefully this is temporary, but we’ll find out.