We continue to follow oil prices after Trump's announcement that the US will pause the attacks on Iranian energy infrastructure for 5 days.
Now the national average for a gallon of regular gas stands right below $4 a gallon.
Now gas prices are surging, but the pain at the pump is just the beginning of the story.
The US and Israeli war with Iran has triggered a massive global energy shock and that.
Could hit your grocery cart as well as retail portfolio and believe it or not, oil is a lot more than just gas tanks.
It's in thousands of everyday products from shampoo to children's choices and not surprisingly searches for EVs are spiking with the prices bottoming even after the loss of the federal tax credit last year.
Well joining us this morning is Patrick De Haan, GasBuddy's Head of Petroleum Analysis.
Patrick, good morning.
Thank you so much for joining us.
So there are a lot of headlines that are breaking this morning, so I do want to start with the immediate reality for the everyday American consumer.
The pain at the pump is the most visible as well as immediate sign of this geopolitical crisis.
So how high do you expect retail gas prices to peak this spring and what might the average driver get some relief?
Well, you know, we could see the national average later today surpassing that $4 a gallon mark.
Obviously what's happening in the Middle East is going to have a major influence on what direction we could see next.
Oil prices plummeting this morning, but It's still likely to be an impact that we feel at the gas pump probably for the next 1 to 3 months.
Now under the ideal outcomes that the president is holding talks with Iran, if there's some sort of positive resolution here in the next week, we could see gas prices getting closer to falling 50 or 60 cents a gallon over the next couple of months.
Months, but I do believe that even in the start of the summer, gas prices likely will still remain somewhat elevated.
So again, we could see the national average peaking sometime this week if there is credible, credible and real resolution.
Other than that though, I do think the national average will probably inch up here for the next couple of days.
Before we could potentially start to see some slow but steady decline, depending on again how the situation unfolds.
It's so much is based on what can happen in the Middle East and specifically with the Strait of Hormuz, whether it can reopen or not.
Patrick, you bring up an important point.
One thing that really struck out to me while looking at the map of average gas prices across the country is that there tends to be this discrepancy depending on where you live.
So what is your advice for Americans based on where they actually live to find cheaper gas prices?
Well, as you mentioned, certainly every state is seeing a difference in price from California, almost $6 a gallon, to the Gulf states that are just still in the low $3 a gallon range.
A lot of it just depends on regionality.
That is right now the coastal areas have been seeing prices go up more dramatically, but the Gulf states where taxes tend to be lowest and you're close to energy infrastructure generally leads to lower prices, and consumers should use apps like Gasbuddy, Google.
Maps or ways to be able to find those lower prices, though I'm sure a lot of them will continue to go up, driving more fuel efficiently, as you mentioned, EVs are getting another look at by a lot of consumers.
Hopefully the impact to energy, gasoline, diesel, and jet fuel is temporary.
We've gone down this road where the administration has said they're talking.
Hopefully it leads to something concrete, but prices probably will still remain elevated here for the next couple of months.
Yes, and that brings me to my next question, Patrick.
So you track these barrels, and we all know that crude isn't just for cars.
So if corporate inventories of petrochemicals are down to several weeks, how quickly does this commodity shock bleed into the price of everyday goods?
So we're talking plastics, medication, shampoo.
How soon could this start happening?
Yes, certainly it's already starting depending on how much exposure there are to prices like diesel.
You talk about the ingredients in some of these components from petrochemicals down the line.
It could start really making an impact here if prices remain quite elevated for more than a month or two.
You're going to start seeing some of these producers increase their costs.
Which then would kind of lead to more inflation.
I think we're not quite there yet.
Companies are going to be looking at passing along the increases.
Consumers probably won't really feel it though because there is a lag to retail for potentially several weeks yet, but the immediate impacts on users like airlines, logistics, supply chains.
You talk about the grocery store that's going to be impacted far quicker than say things that are produced from petrochemicals like shampoos, plastics, lipsticks, etc.
Those types of individual items probably will take longer to see much price increase, but overall as the cost goes up for what's at the grocery store, produce, meats, those types of items will likely see far more of an impact far quicker.
Patrick, you just mentioned EVs, so I have a question about hybrids.
So Edmonds is seeing a major spike in consumer searches for fuel saving hybrids.
So from your vantage point, does a mass consumer shift to hybrid put a meaningful dent in long-term US gasoline consumption, or do you think it's just a drop in the bucket for overall oil demand?
Well, I think slowly EV sales have gone up over the last few years.
There's likely millions of EVs on the roads today, but it still pales in comparison when you're talking about internal combustion engine vehicles.
But it is certainly likely making a dent in overall in US gasoline demand.
It may be down in the vicinity of 5 to 10% because of EVs.
But as we continue to go down the road, Trump has eased the CAFE standards that may cause fuel manufacturers, excuse me, auto manufacturers to decrease fuel efficiency moving forward.
So there is a possibility that even with more EVs on the road, if we do see auto manufacturers rolling back some of those fuel efficiency gains.
We could be seeing a bit more of an offset where you may see more EVs on the road, but less average fuel efficiency if those newer vehicles kind of remove the fuel efficiency gains that we've seen from the CAFE standards.
Patrick, before I let you go, when we look at the sectors within the S&P 500, we know that the energy sector has been outperforming.
So for the retail investors out there trying to navigate this volatility we're seeing in energy, would you say it's the big integrated majors capturing upstream windfalls or are there better opportunities in the downstream companies right now.
Well, certainly exposure to the price of oil and refined products that are also in scarce demand right or quantity right now is certainly where you'll probably see the best performance, that is upstream and midstream producers, whether refining or oil companies directly.
But keep in mind a lot of this could be temporary.
If we do see a quick resolution.
Oil prices may fall rather dramatically, and while it may take Months for prices to get back to their pre-war levels, we could continue to see oil prices struggle depending on what's contingent in the Middle East, but it's a very volatile situation to trade right now.
Companies that deal with oil, you're going to see a lot of volatility based on any new developments, and all of this may not be long term.
It could be short term infusions and potentially a lot of long term volatility.
Well, Patrick, indeed, I believe that volatility is the key word here.
So thank you so much for joining us on this Monday morning and thank you so much for sharing all of your insights.
Thanks for having me.
