A near-record run of U.S. gasoline inventory draw-downs is flashing a stark warning for fuel markets: the system is losing its buffer just as seasonal demand crests.
That combination does not guarantee shortages - but it sharply raises the odds of sudden, outsized price moves if anything goes wrong in terms of replenishing inventories as the peak U.S. driving season gets underway.
U.S. gasoline prices have already jumped by 50% to close to four-year highs since the U.S. and Israeli war against Iran began on February 28, and currently average around $4.33 per gallon, U.S. Energy Information Administration (EIA) data shows.
But prices could now be primed to take a fresh leg higher after 15 straight weeks of gasoline inventory reductions have drawn national stockpiles to their lowest for this time of year since 2014.
A durable peace deal in the Middle East that speedily restores tanker traffic through the Strait of Hormuz could help avert further steep reductions to U.S. gasoline stocks, and may limit additional price gains over the near term.
But any resumption in military hostilities that threatens to further hamper oil production and exports from the Middle East will likely spark a fresh rally in U.S. gasoline prices this summer, stoking cost-of-living fears across the country. Read the full column for more.
