Robert Rapier has some concerns about what could be in store for the U.S. this summer.
Product inventories give us a very useful way to smooth out production relative to the predictable seasonal variations in demand as well as to respond to unpredictable disruptions in supply. But, as Robert Rapier notes, that cushion is not feeling all that comfortable at the moment:
If you look at the historical trend, what has happened is that in every year since 2001, the gasoline inventory gains of the spring flattened starting in June, and then decreased in July and August. The inventory draw was as much as 21 million barrels in 2005. And it is almost universally true that levels at the end of August are lower than levels in June, because July and August are when demand really starts to pick up. This is why many still feel like we have a potential problem.
EIA estimates of U.S. gasoline inventories, via R-Squared Energy Blog
In [the above figure], you can see that while inventories have been on the rise, we are just about at the point that they historically flatten out. Then, toward the latter part of June to early July, they take a nose dive. From current inventory levels, that would drop us below the 190 million barrel mark, which could once again cause prices to spike again.
Yet, we may in fact skate by if there are no unforeseen problems. If we have no disruptions from hurricanes, imports stay strong, and we have no major refinery outages, we are likely to slowly climb out of this hole. But recent history suggests that we are likely to see more draws over the summer, exacerbating an already tight inventory picture.
Rapier relates the following calculation from OPIS as to how tight that inventory picture could be:
New England and the Southeast, both regions that could suffer a direct hit in this year’s hurricane season, have some of the lowest inventories in the U.S. Just how thin is the supply cushion? About 11 gallons per person is all that is available, according to an analysis of inventory data by Oil Price Information Service.
Just in case you’re having trouble connecting the dots, let me spell out what this means. It suggests there’s a significant risk that this summer we may see more congressional inquiries into who’s to blame for all that price gouging.