Interesting daily observation this weekend: Crude oil price has been increasing drastically for some quarters now but price adjustments at Texas gas stations remains flat for 4-8 weeks now.
DO YOU THINK? (1) crude oil price already baked into the consensus? OR (2) time to switch to a Prius/hydrogen fuel cell car? One major implication behind the rising oil price is cutting on consumer discretionary given the inelastic demand nature of the product. Also, light truck sales have officially sold more than sedan since Q1 2017; further downside for consumers discretionary spending if trend is to continue. Not to mention consumers are taking more 84/96-month loans which will essentially put the asset value underwater once the debt is fully repaid, there’s a reason why we start with 60-month.
Gasoline and crude oil price are highly correlated given the upstream/downstream relationship. With US looking to drill even more offshore + the existing shale oil technology, I wonder what the upside in crude oil price will be in the coming quarters with the potential substantial increase in supply. This is ignoring important fact like China will drive the demand side (>50%) of the equation in 2018/2019 and the newly opened yuan-based crude trading facility.
Intersection notepad 