Stock Market Insights: Gas prices

As a child, my gorgeous wife couldn’t hit a softball, but she did master the yo-yo “walk the dog” trick. Somehow that talent never came up on our first date. Maybe not walk the dog, but we have seen a yo-yo effect with gas prices in the past few years.

In the spring of 2020, gas prices dropped to their lowest levels in decades because of a lack of demand during the pandemic. Shortly after, oil and gas prices rose sharply through the economic recovery and shipping problems in 2021.

In early 2022, production problems and the war in Ukraine pushed prices even higher because there were more buyers (demand) than sellers (supply). According to AAA, this led to the highest recorded national average regular price of $5.016 for regular unleaded on June 14, 2022.

Thankfully, oil prices, the main ingredient in gasoline, have dropped this year by roughly 40% from last year’s peak. The current national average for regular unleaded is $3.58, a significant improvement from the $5 per gallon in mid-2022.

The lower gas prices aren’t because of a lack of demand. JP Morgan says oil demand is about the same, but the oil supply has increased considerably, leading to lower prices at the pump. There is more oil flooding the market, mainly coming from the U.S.

Though Saudi Arabia and Russia are trying to drive up oil prices by reducing their oil exports, the strong increase in U.S. production is ruining their plans. The OPEC nations hate that the U.S. oil producers are uncontrollable and market driven.

In the long run, oil and gas prices should continue dropping as increasing inventories continue to drive down the market. This should be considered good news for most of the market, as fuel prices are a major part of shipping expenses and inflation.

Shockingly, my sweet little wife wasn’t always so wholesome with a yo-yo. Her grandparents caught her swinging it above her head and almost hitting her sister, leading to the only spanking she ever got from her grandparents. She needed to play with it nicely like it was supposed to be used.

OPEC also needs to play nicely and allow the market to work like it should.

Have a blessed week.

Fervent Wealth Management is a financial management and services entity in Springfield, Mo. Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

Opinions are for general information only and not intended as specific advice or recommendations. All performance cited is historical and is no guarantee of future results. All indices are unmanaged and can’t be invested in directly.

The economic forecast outlined in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

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