U.S. gasoline prices are at record highs, averaging more than $4.50 per gallon at the pump, and surpassing $4 in all 50 states for the first time. But, says Natasha Kaneva, J.P. Morgan’s head of global commodities research, prices could climb over $6 this summer.
Why the rise? Sanctions have cut Russian oil and refined-fuel exports. U.S. refiners, motivated by rising European prices, are shipping more diesel and gasoline there; they’re also selling some 100,000 barrels a day more than usual to Mexico and other nations. In the past five years, the U.S. has averaged 65 million barrels of gasoline in storage in mid-May. This year, fewer than 55 million are available. “Typically, refiners produce more gasoline ahead of the summer road-trip season, building up inventories,” Kaneva writes. Today, U.S. gasoline inventories are at their lowest seasonal level since 2019.
Kaneva predicts that, at the peak, Americans will use 9.7 million barrels a day of gasoline, while 9.1 million will likely be available. That 600,000-barrel daily deficit is 200,000 higher than usual. That could leave the U.S. with its lowest inventories by August since the 1950s. Her math says prices will rise 37%, to $6.20 a gallon.
Another factor: The U.S. oil standard, West Texas Intermediate, recently lost its traditional discount to the global standard, Brent. U.S. sellers now have the infrastructure to sell abroad, accessing U.S. and international demand. What could change the picture? If refineries began pumping out more gasoline quickly or limiting exports, prices would likely fall. A recession might do the trick too. Consumers should prepare.
Trouble With Retail
The week began with signs of weakness in China, with production down, consumer spending off, unemployment up, and junk bonds flagging. U.S. stocks opened down (and crypto took more losses), then rallied on April retail spending data. But gains on Tuesday meant losses on Wednesday and Thursday, fueled by gloomy retail outlooks. On Friday, the S&P 500
toyed with the bear, but firmed. On the week, the Dow Jones Industrial Average lost 2.9%, to 31,260.58; the S&P shed 3.05%, to 3901.36; and the Nasdaq Composite fell 3.8%, to 11,354.62.
The Earnings Beat
Retail bombed its earnings test. Walmart missed, blaming supply-chain woes and high fuel prices, and its shares fell 11%; Home Depot beat and raised guidance. But Target missed by a lot and saw its shares crater, taking retailers from Dollar General to Costco Wholesale to Lowe ’s with it.
Not Exactly Pay Pals
A JPMorgan Chase plan to hike pay for senior executives, including CEO Jamie Dimon, got shredded by shareholders, with only 31% voting for it, a record bad tally. It’s not binding, but the bank said it would rethink things. Intel also saw a comp plan rejected, joining General Electric and AT&T .
The War Grinds On
Ukraine pushed Russian troops past Kharkiv. McDonald’s and Renault said they would sell their Russian operations; Google’s unit in Russia will file for bankruptcy. The Donbas offensive bogged down, Ukrainian holdouts at the Mariupol steel works surrendered, Putin softened on Sweden and Finland joining NATO, Russia failed to receive support from most of its own security confederation, and a military analyst on Russian TV warned that the country is isolated and not winning the war. The U.S. Treasury is likely to block Russian debt payments to U.S. investors.
Terror in Buffalo
An 18-year-old drove to Buffalo, N.Y., and killed 10 in a supermarket in a predominately Black part of town. The alleged shooter published a racist screed before the attack, which he livestreamed. He could be charged with a hate crime, terrorism, and murder.
Annals of Deal Making
JetBlue went hostile after Spirit Airlines rejected its takeover offer in favor of a deal with Frontier . JetBlue offered $30 a share in a tender offer, but said it would raise that if Spirit negotiated. Spirit shares rose 22%…Elon Musk tweeted that he would do the Twitter deal only if the company’s claim on bot usage was true. He also raised the possibility of the deal failing or a lower price. Twitter shares fell…Activist HG Vora offered $5.5 billion to take fleet management and supply-chain operator Ryder Systems private… KKR is selling garage-door maker C.H.I. Overhead Doors to Nucor for $3 billion…The Department of Justice’s antitrust chief, Jonathan Kanter, warned that buyout deals would face greater scrutiny.
Write to Avi Salzman at [email protected]
