Publications: Notes at the Margin

IMO 2020 Price Impact Forecasts; Unplanned OPEC Production Outages; More on Blue State/Red State Gasoline Spending (April 8, 2019)

 

In Section 1, we drive home the point that no information—absolutely none—can be gleaned from futures or forward curves today regarding the evolution of prices in the coming year as influenced by the IMO 2020 transition. The final impact will depend on the increased demand compared to the increased supply of low-sulfur distillate (low-sulfur diesel). Our view on this has been consistent. We have written often that the rise in global demand will exceed the increase in global supply by between five hundred thousand barrels per day and one million barrels per day. We expect cash prices to double.

 

In Section 2, we explain how oil markets, like other commodity markets, often experience the "cockroach effect."

 

The April 1 Notes at the Margin extended an analysis by Liam Denning showing that states that went to President Trump in the 2016 election were more exposed to higher gasoline prices than those won by Hillary Clinton. We expand that discussion in Section 3 using detailed data from the US Department of Commerce and OPIS.

 

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