Biden Considers Pausing Federal Gas Tax Collection
June 21, 2022
This is a short trading week as yesterday the market was closed, and we only have four days left to finish out this week. The market is still concerned about a recession which will slow energy demand. On the other side of the coin is the low physical inventories and low spare refining capacity. If demand can continue despite high prices, then prices will continue to be supported because inventories are not building. But if demand gets knocked down as inflation eats into people’s discretionary income, then supplies will begin to build putting downside pressure on prices. Where this will shake out is anyone’s guess right now.
The other factor that could keep demand up is the potential for a pause in the federal gas tax. President Biden said on Monday that a decision on whether to pause the federal gas tax could come by the end of this week. If the tax is halted, then this could potentially lower prices by 18 cents per gallon which is a good thing for consumers, but it also could potentially keep demand up and complicate the low inventories situation. The market is trying to raise prices high enough to slow demand and cutting the federal tax could lead to more demand and force prices to rally higher to slow demand.
Southeast Asia’s gross refining margin for making gas oil from Dubai crude oil has climbed to a record $70 per barrel, up from $7 per barrel a year ago.
China’s crude oil imports from Russia soared 55% from a year earlier to a record level in May, displacing Saudi Arabia as the top supplier, as refiners cashed in on discounted supplies amid sanctions on Moscow over its invasion of Ukraine.
Crude oil inventories are 418.7 million barrels which puts them at 24% below the five-year average for this time of year. Gasoline inventories are 11% below the five-year average, distillates are 23% below the five-year average for this time of year, and propane inventories are 13% below the five-year average.