With oil prices potentially set…
Oil prices have traded flat…
Even though gasoline prices in the US are currently $0.15 a gallon higher than this time last year, and have been constantly rising for the past two months, Robert Rapier predicts that they will start to fall rapidly in the coming weeks.
First, he states, is the fact that the price spike caused by Hurricane Isaac will quickly drop due to the fact that the damage to infrastructure seems to be small and therefore oil and natural gas production is expected to return to normal very soon.
He also reminds us that the summer is over. That means two things; one, that the driving season is over so demand for gasoline will fall; and two, that on the 15th of September the cost of gasoline will drop and supply increase as winter gasoline is supplied to the pumps. Winter gasoline is made up of a different blend of hydrocarbons than summer gasoline, as explained in this article.
These factors make it very likely that gasoline prices will now fall in the run up to the elections. Of course there are always other factors that could come about and cause the prices to rise, but the as things currently stand you should expect prices to drop.
An even larger drop could occur if Obama decides to release oil from the Strategic Petroleum Reserve.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com