Publications: Notes at the Margin

Recalibrating Thinking for Lower Demand Levels (April 23, 2012)

 

Spot gasoline prices have dropped nine percent in a month in New York and the Gulf. Last week alone, the spot price gave up twenty cents in both markets. Refiners bid down crude prices as product prices fell. The drop has left many scratching their heads because inventory levels as reported by the Department of Energy (DOE) are not all that high by historical standards. The agency reported last week that Atlantic Coast inventories fell more than two million barrels for the week ending April 13, while imports into the east were at the lowest level since May 2004.

 

Traders can be excused for being perplexed, especially those who follow the market as investors. Apparently the usual indicators, particularly data published weekly by the American Petroleum Institute (API) and DOE, are becoming unreliable.

 

The answer offered in this report is the data are not becoming unreliable. Rather, the data publishers and users are failing to account for underlying changes in the market. 

 

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