Saturday, July 20, 2013
So once again we'll take a look at the US All Grades weekly average price per gallon, and my fixation with the 52 week moving average (MA). This makes sense to me as a proxy for the annual cost of gasoline to US households at most aggregate level.
Takeaway is on the plot above - for the last 1.75 years that 52 week MA has exceeded the peak 52 week MA from 2008 - even though we have avoided the national average cost per gallon of $4.00/gallon. I will posit this is a big part of what is driving several trends, from the largely flat Vehicle Miles Travelled (VMT) to the reduced rate of driver's license acquisition to the move to city cores (particularly in intersection with wretched employment and wage statistics for youth and new college grads).
Additionally, the experience of the impact across the US consumer economy will vary dramatically by income quintile as a function of the amount of disposable income (or what would otherwise be disposable income) these sustained high prices absorb. I admit to having a jaundiced view of US reported consumer sales growth as the pool of reporting companies has been reduced by those who have chosen to no longer report them (with no attempts to correct for survivors' bias).
Finally, the great China rebalancing may be underway, which would materially reduce commodities demand in general. The picture seems less clear on the impact for oil and gasoline prices, as the increase in purchasing power for the consumer sector that a rebalancing would represent suggests increased demand for status and lifestyle purchases. At the current time, automobiles appear to be high up on that list.
[Side bar: It is difficult for me to see a sustained period of low oil prices due to the likelihood of increased instability in many exporting countries - current social spending needs to mollify populations require high prices to maintain - once currency reserves are exhausted and the ability to borrow/sell forward...]