Global markets reacted in a seemingly positive manner to the reported death of Libyan Dictator Colonel Muammar Gaddafi with oil trading at a lower price on the U.S.A. and European markets. But the bear market for oil was relatively shortlived. In terms of local gas prices, we can expect to see lower prices for other reasons.
The death of Muammar Gaddafi was credited this morning with
a sharp drop in oil prices, and as a possible source of equally
sudden drops in West Coast wholesale gas prices. But correlation
does not always equal causation. At least not entirely, and as
the trading day has advanced, so too have the reactions of traders.
While the death of Gaddafi was seen as good news in European
markets, the grisly video of Gaddafi's bloody corpse being dragged
through the street should be enough to give some traders pause
about the stability of Libyan oil exports.
Meanwhile, gasoline inventories have been building on the West
Coast, and according to the DOE, U.S. gasoline EXPORTS are
increasing. That's right - exports.
Demand destruction from the ongoing "recovery" has resulted in increased
overseas exports. And on the West Coast, the demand destruction
from our "jobless recovery" has resulted in some pretty big builds.
As a result, the average price of wholesale gasoline has dropped 12¢
since Monday (a major move). But while the average decrease is
seemingly optimistic, it also disguises pricing volatility that hasn't been
reflected in the street price -- In the last seven days, wholesale prices
are down by only 6 cents on average.
Our call? Prices will go down this weekend, barring more macabre news
or videos of bloodtsained corpses from the Middle East. Hopefully Libya's
new government will find a way to avoid bloodshed, embrace religious and
ethnic diversity, and create peace, freedom and prosperity for its citizens.
In the meantime, Libya's turmoil appears to have had little effect on
local gras prices, and we expect them to decline through Monday.