With crude oil accounting for 65% of the price of gasoline, there’s typically a high correlation between the price of oil and gasoline. However, there’s been a disconnect between the two for the most part of this year. The main reason for the disconnect is the divergence of supply market fundamentals.
As the two charts below illustrate, while domestic crude oil supply remains way above the 5-year average, the gasoline supply is actually a lot tighter by historical norm, primarily due to some domestic unscheduled refinery accidents/outages, refinery closures in the Atlantic Basin leading to an increase in gasoline exports from the US.
However, even if there’s an SPR release–unilateral by the U.S. or not–it will unlikely have as significant impact as people might expect on gasoline prices due to the diverging supply fundamentals discussed here. Think it could be a good idea to consider a strategic gasoline reserve as well?