Gas and Oil Prices are Diverging
Gas and Oil prices are diverging which makes complete sense now why oil can be near 52 week lows while the price we actually pay at the pump has gone up.
For the life of me recently I could not figure out why I was paying $1.60ish per gallon late last year and now it is back up to nearly $2.00 per gallon. Now I see why.
Great charts from Bespoke Investment Group depict the clear diversion between gas and oil prices by look at the appropriate ETFs, the United States Oil Fund (USO) and the United States Gas Fund (UGA).
Bespoke writes:
Even as oil prices have continued to fall in recent weeks, gasoline has diverged and gone higher. The second chart looks at the year to date change of the two commodity ETFs. As shown, USO is down 23% year to date, while UGA is up nearly 23%. This divergence is not what the consumer needs right now!
(STTG Education Note: USO is arguably not an accurate representation of the actual price of oil, and due to how it rolls its WTI futures contracts each month forward it underperforms the price of WTI.)
2-15-09 Update: Great article for further explanation on why prices have diverged.
Source:
Kick Consumers While They’re Down: Oil and Gasoline Diverge
Bespoke Investment Group, February 12th, 2009
