Gasoline Prices Hit 5 Year Lows as Inventories Swell

Inventory Build-Up

The latest data from energy agencies shows a substantial build in gasoline stockpiles. Refineries, running hard to meet diesel demand, are producing excess gasoline as a byproduct. With driving activity at its seasonal nadir, this fuel is piling up in storage tanks, putting severe downward pressure on spot prices.

Consumer Demand Weakness

Implied demand figures suggest that motorists are driving less than in previous years, potentially due to economic headwinds or changing work habits. The lack of a strong pull from the pump is leaving wholesalers with excess product. This weakness is expected to persist until the pre-spring maintenance season begins in late February.

Crude Correlation

The weakness in the crude oil complex is also dragging gasoline lower. With WTI struggling to hold $60, the cost of the primary feedstock for gasoline has dropped, allowing refiners to lower product prices while still attempting to maintain margins. Analysts predict gasoline will remain in a bearish trend for the short term.