The average U.S. household’s gasoline expenditure has jumped to $5,000 a year over the past 12 months, from $2,800 this time last year, according to new research. And there does not seem to be a sign of relief in sight. Yardeni Research reported the figures, as cited by CNBC, adding that since March this year alone, annual spending on gasoline by households had risen by more than $1,000—in March the figure stood at $3,800.
Meanwhile, prices are still rising, breaking record after record. Earlier this week, the national average hit an all-new all-time high of $4.567 per gallon. That’s up from $3.043 per gallon a year ago, according to AAA data. In California, the average gasoline price reached $6.05, up from $4.135 a year ago.
“No wonder that the Consumer Sentiment Index is so depressed. The wonder is that retail sales have been so surprisingly strong during April and May,” Yardeni Research said in a note.
Indeed, retail sales have surprised with growth over the past couple of months, somewhat alleviating fears of a looming recession. However, consumer sentiment has not moved in tune with sales.
The early estimate released monthly by the University of Michigan showed last week that U.S. consumers are now more pessimistic than they were in April when the index rebounded from another drop.
The April reading was 59.1, down from 65.2 in April and significantly lower than the expectations of economists polled by the Wall Street Journal, MarketWatch reported last Friday. It’s worth noting that the April reading broke a three-month streak of consumer sentiment declines.
U.S. inflation, meanwhile, remains at the highest in four decades, in part driven by higher—and rising—energy costs. West Texas Intermediate has reached parity with Brent for the first time in years, both trading at a little over $110 per barrel at the time of writing.
Crude oil inventories remain about 14 percent lower than the five-year average, and distillate stocks are still tight, pushing the prices of diesel and jet fuel higher at a time when demand for goods transported by trucks as well as demand for air travel is also on the rise.
Diesel fundamentals are particularly worrying as supply is still catching up with demand, and some are expecting diesel shortages in parts of the United States this summer.
Such a situation would suggest lower fuel sales as consumers balk at higher energy prices. Indeed, gasoline sales declined last month as spending on the fuel jumped by as much as 37 percent on an annual basis, CNBC noted in its report, citing data from the Commerce Department.
Relief does not seem to be in sight. Crude oil production is on the rise, but it won’t be enough to lower prices at the pump. Legislation aiming to effectively ban what its sponsors consider excessive retail fuel prices is making its way through Congress. Yet fundamentals are more complex than just local production and a legislative bill.
That bill, by the way, is not at all certain to pass. It is already encountering opposition in Congress, including from fellow Democrats to its sponsors. One such opponent, Rep. Vicente Gonzalez from Texas, told media that he has yet to see proof that price-gouging is occurring, The Hill reported. Other legislators are uncertain about the benefits that such a bill would actually have—or whether it would have any at all.
The global supply and demand situation in oil is such that pretty much every analyst expects prices to remain elevated for the foreseeable future, even though the International Energy Agency forecast that the world would weather the estimated loss of 3 million bpd of Russian oil later this year thanks to lower demand, driven by the lockdowns and China and high prices.
By Charles Kennedy for Oilprice.com
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