Gas prices extended further into record territory surpassing $3.55 a gallon on more news of tightening supplies. Gasoline inventories unexpectedly fell 3.2 million barrels last week raising concerns of future fuel supply levels as we approach the peak summer driving season.
Could we see $4 a gallon at the pumps?
RBOB futures have followed the rest of the energy complex higher in recent sessions. Gasoline prices that we pay at the pump are influenced by a number of factors; the futures market, crude oil prices, the dollar, and refinery utilization. The crude-gas crack spread has been widening causing refiners to cut production due to low profit margins. Refiners have been unable to raise gas prices in conjunction with the soaring cost of crude. Moreover, there is a shortage of a necessary additive for making summer grade gas called Alkylate-Further putting upward pressure on the price of gasoline.
On a percentage basis, there is tremendous upside potential in RBOB futures.
Higher crude prices+falling dollar+tightening supplies+speculation= higher Gasoline cost
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