Market Overview: Unleaded Gas (HU)

Distillation is the primary method of refining Crude Oil into Unleaded Gasoline. The Crude Oil is heated at the bottom of a tall metal tower. As the Crude gets hotter, it turns to a gaseous state and the vapors rise. As the vapors rise, they cool. Each Crude Oil by-product, in its gaseous state, has a specific cooling temperature, corresponding with a height of the tower. At these predetermined heights in the tower, pipes lead off to separate the various petroleum products. Heavier fractions like fuel oils, and diesel fuel, are taken from the bottom part of the heating tower. Lighter fractions, like butane, gasoline and kerosene are taken from the top of the tower. The heating tower produces the rough materials for the six basic categories of petroleum products.

Gasoline includes premium and regular grades, both leaded and unleaded, along with other refinery products. For over a decade, gasoline has been the largest petroleum product refined in the United States and the world. Three-quarters of the total usage of gasoline is by individuals, with demand ebbing and flowing with the driving habits.

Seasonal Overview:

Public consumption of Unleaded Gasoline for transportation makes up the bulk of the demand for Unleaded Gasoline. As such, during the first quarter of the year, when stocks are large and building and demand is lackluster due to poor driving weather, prices tend to decline. From early spring through summer, prices generally rally since demand is the greatest during the summer driving season. The onset of winter, with its snow and hazardous driving conditions, typically brings a peak in Unleaded Gasoline prices, which tend to decline during the winter as demand wanes.

Unleaded Gas: (High: Apr-May//Low: Dec) Driving conditions worst in winter (Dec-Feb). Inventory building begins in March and peaks by Memorial Day (late May), traditional opening of US vacation and driving season. Heaviest consumption ends Labor Day (early Sep). Purchases delayed at end of year to avoid year-end inventory tax.

Chart courtesy of Moore Research Center, Inc.