May 13, 2024

An Annual Ritual at the Gas Pump

Weekly Market Commentary

You’re right if you have this nagging feeling that gas prices rise in the spring. As the graphic illustrates, on average prices rise through Memorial Day, plateau over the summer, and slip in the fall. This year is no exception, as prices echo the seasonal pattern.

Since 2000, one glaring exception occurred in 2020, as prices fell amid lockdowns tied to Covid.

According to the Energy Information Administration, the average price of regular gasoline this year bottomed at $3.06 in January. As of the last reporting date, the price averaged $3.64 on May 6.

What’s behind the seasonal drift in prices?

Summer blends used to reduce smog cost more. And the changeover occurs as the summer driving season, which boosts gasoline demand, gets underway. It’s a double whammy for drivers.

Also, partly due to instability in the Middle East, oil prices are up this year, though prices are off the 2024 high.

Since we are discussing gasoline prices, let’s address one more thing. Oil prices jump, and the cost of gasoline seems to follow quickly. Then, oil comes back down, but the decline at the pump seems agonizingly slow.

Economists call it “asymmetric pass-through.” Those in the oil industry call it “rockets and feathers.” That is to say, prices rise like a rocket and drop like a feather. The issue bedevils drivers.

A detailed review by the Federal Reserve Bank of St. Louis concluded, “The market for gasoline is local, with variations in market concentration, demand, regulation, and taxation.”

In plain English, “Opportunities exist for retailers to take advantage of price changes to maintain a higher overall profit,” the authors noted, as they “adjusted prices downward slower because consumers were already accustomed to the higher prices.”

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Advisor. Securities offered through Valmark Securities, Inc., Member FINRA/SIPC | 130 Springside Drive Suite 300 Akron, OH 44333-2431 | 800.765.5201. FDP Wealth Management, LLC is a separate entity from Valmark Securities, Inc. If you do not want to receive further editions of this weekly newsletter, please contact me at (949) 855-4337 or e-mail me at or write me at 8841 Research Drive, Suite 100, Irvine, CA 92618. FDP Wealth Management, LLC, Valmark Securities, Inc. and their representatives do not offer tax or legal advice. You should consult your tax or legal professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.


A Steady-as-She-Goes Fed and a Tame Inflation Report

As expected, the Federal Reserve announced last Wednesday that it held its key rate, the fed funds rate, unchanged at 5.25 – 5.50%. The Fed left the door open to a cut in rates later in the year if inflation makes meaningful progress toward its 2% annual goal or if there is an unexpected weakening in the labor market.

Strong Jobs Report, with a Caveat

The U.S. Bureau of Labor Statistics reported that nonfarm payrolls in May rose 272,000, easily beating expectations of 190,000 per the Wall Street Journal. Over the past three years, nonfarm payrolls have usually topped expectations. That narrative remains intact.

Housing Prices Hit New Record

The price of a home hit a new record, according to the latest data on housing prices. The S&P CoreLogic Case-Shiller 20-City Home Price Index, which measures monthly housing prices in 20 major metropolitan areas, rose 1.6% on a nonseasonally adjusted basis in March.

Drifting Higher

Stocks have been drifting higher for several weeks as investors search for a catalyst that could drive shares in either direction. Interest rates can influence market direction, but there hasn’t been much news recently on the rate front.

How Do Investors Spell Relief?

Investors celebrated an ‘in line with expectations’ CPI that suggested the rate of inflation isn’t accelerating. It’s a small win, but it was enough to send the three major market indexes, the Dow, the Nasdaq, and the S&P 500 to new highs.