Fuel Flash – October 2023

Oil prices continued their ascent into September, reaching the mid- to high-$80/barrel mark to begin the month. Saudi Arabia maintained their production cuts for another month and the market reacted with fears of supply tightening. The following graph shows the daily price movements over the past three months:

By mid-month, oil prices surpassed $90/barrel. These are the highest levels seen since November of last year. Along with the supply cuts mentioned earlier, we are entering the fall which is expected to be a busy maintenance season for refineries.

Rising fuel prices are not helping with the U.S. economy’s inflation problem. Georgia Governor Brian Kemp announced the suspension of the state excise tax for gasoline and diesel. This will be in place from September 13th through October 12th and will save Georgia drivers roughly 31 cents on gas purchases and 35 cents on diesel purchases.

The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

Diesel prices have been on the rise since July. Profit margins for diesel saw a slight increase with retail slightly outpacing wholesale. Gasoline retail and wholesale prices were relatively flat and resulted in flat profit margins from August into September. The following graph shows the retail margins over the trailing 15 months:

After seeing a big gain in August, crack spreads had big losses in September, although spreads remain above average in 2023. Looking back at last year, they have fallen from the exceptional high marks seen in 2022. See the trailing 15 months in the graph below:

According to AAA, the national average gas price remained unchanged month-to-month finishing at approximately $3.82/gallon. Diesel prices increased by roughly $0.11 compared to August finishing at $4.56/gallon in September.

September saw oil prices hit just under $94/barrel, putting the $100/barrel mark within striking distance. Ultimately the month ended just under $91/barrel, but supply concerns will continue to keep prices elevated with factors such as: OPEC+ maintaining production cuts, fall refinery maintenance, and inventory levels being drawn on.

Sokolis will continue to monitor the many factors going into fuel prices. Things change quickly, but currently we anticipate that oil prices will range between $90-100/barrel.