4 Charts that have everything and nothing to do with Crude Oil Speculation

It’s not hard to surf around on the internet and find stories of the United States fading from its supremacy over the rest of the world in education, average income, and happiness… but there’s one title we’ve seemed hell-bent on reclaiming. And now we’ve got it!  Last month the United States overcame Saudi Arabia as the world’s biggest producer of oil because of a jump in shale output, according to Reuters.

“U.S. output, which includes natural gas liquids and biofuels, has swelled 3.2 million barrels per day (bpd) since 2009, the fastest expansion in production over a four-year period since a surge in Saudi Arabia’s output from 1970-1974, PIRA said in a release on Tuesday.

It was the latest milestone for the U.S. oil sector caused by the shale revolution, which has upended global oil trade. While still the largest consumer of fuel, the rise of cheap crude available to domestic refiners has turned the United States into a significant exporter of gasoline and distillate fuels.”

Is this the reason for the fall in gas prices? Does this mean we’re going to continue to see gas below $3.00/a gallon nationwide? Does this mean crude prices won’t be affected as much because of unrest in the Middle East? No, no, and no. This wasn’t an overnight development. To the contrary, it has been many years in the making as US producers figured out where and how to get at the Shale Oil.

But it’s hard to ignore the sell off in Crude Oil and Gasoline prices this fall. Since its highs in September, Crude is down 15% and Gas prices are at their lowest level since February of 2011.

Short Term Crude Oil
Chart Courtesy: Finviz.com
(Disclaimer: Past performance is not necessarily indicative of future results)

AAA Gas PricesChart Courtesy: AAA

It’s quite interesting to see how similar the moves in gas prices are year after year (something not lost of gasoline trader Protec Energy, to be sure – whose model is based in part on participating in the ‘spring build’ in gasoline supplies for the summer). A lot of that has to do with weather, the fact the kids are out of school in the summer, and so forth. But the smaller moves in Gasoline this year may be part of a bigger shift away from driving.

Barry Rithotlz of the Big Picture  suggests that the fall in gas prices is due to the fact that fewer people are in fact driving to work regardless of weather, (when adjusted per capita).

“There are a few factors driving this: Total miles driven has not recovered from its November 2007 highs. It is off almost 3 percent from its highs of more than 5 trillion vehicle miles driven annually. Persistently elevated unemployment of 7.3 percent means there are that many fewer people driving to work. And the pre-collapse shift to the exurbs — and their much longer commutes — suggests the trend toward ever-longer commutes may have topped out.

To put gasoline prices into the starkest relief, consider adjusting total U.S. miles traveled on a per capita basis. The chart above, via Doug Short, reveals that per capita miles driven peaked in June 2005. They have since fallen almost 9 percent. The last time we saw average annual mileage at these levels was back in 1995.”

Miles Driven on All RoadsChart Courtesy: Barry Ritholtz

Whatever’s going on – the managed futures world would prefer to get a different look to the energy markets – which have been mostly range bound since 2011, moving between $80 and $115. So whether it’s a deal with Iran and massive amounts of truck fleets switching to natural gas-powered vehicles driving Crude prices down into the $60’s, or unrest in the Middle East, economic improvement around the world, and a return to driving in the US pushing prices into the $140s – we don’t care. Just move already.

Crude Oil Long

Chart Courtesy: Finviz.com
(Disclaimer: past performance is not necessarily indicative of future results)


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