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Energy Policy

Those Scary Reports About Soaring Gas Prices? They're Wrong

Don’t look now, but summer is fast approaching and gasoline inventories have hit a record low. Consequently, prices are rising. They just reached a 9-month high. Here’s a Bloomberg terminal chart that captures the recent movements:

Elsewhere today, Bloomberg Government (subscription required) reports that money managers have boosted their net long positions on gasoline. According to the U.S. Commodities Futures Trading Commission, those long positions reached a 14-month high last week. Speculators are betting that gas prices will climb even higher. “Refiners are having a hard time keeping pace with the overall demand, both domestically and internationally,” Tom Finlon, director of Energy Analytics Group, told Bloomberg Government. Part of the problem is unplanned repairs at U.S. refineries.

All this would seem to indicate a nightmare for U.S. drivers come summertime, when Americans hit the road for vacation. But it actually bodes no such thing, says Tom Kloza, chief oil analyst at, a website and app that offers real-time local gas prices. “Those inventory numbers don’t really mean all that much,” he says. One reason is that gas inventories always fall during the spring as refiners switch from “winter blend” gas to cleaner-burning “summer blend.” “We’re essentially an industry that has to give itself an enema every year, as the winter gas is flushed out of the system,” says Kloza.

Switching to a slightly more pleasant analogy, Kloza says we’re in the 8th or 9th inning of winter gas inventories, thus the low numbers. It doesn’t automatically follow that demand for summer gas will spike. Kloza offers three reasons why it may not: The U.S. population is aging (seniors drive less), fewer teenagers are getting their licenses, and former Federal Reserve chairman Ben Bernanke induced lots of folks to trade in their old gas-guzzlers for newer, more efficient cars by pushing down interest rates. “People are replacing cars en masse that got 15 to 18 mpg with ones getting 25 mpg or more,” says Kloza. “That has a big effect.”

Kloza says the real pain at the pump may come this weekend, when tapped-out inventories will have pushed prices to a peak. “But I wouldn’t be surprised,” he adds, “if the Cinco de Mayo price is higher than anything we see this summer.”

Green is senior national correspondent for Bloomberg Businessweek in Washington. Follow him on Twitter @JoshuaGreen.

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