Fill 'er Up

Luke Burgess

Posted August 25, 2006

On my way to work this morning I stopped at the local filling station and topped off my gas tank. And I suggest you go and do likewise.

Average retail gasoline prices have fallen significantly since the beginning of the month and are now at multi-month lows. Here in the U.S., the engine fuel has dropped over 5% since August 4th while average prices in Canada have dropped nearly 10%.

Typically we might think that a month-long decline would suggest a further decrease in prices — at least in the short-term. But not this time.

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Ernesto Goes to the Gulf

According to the National Weather Service (NWS), Tropical Depression Ernesto is now almost a tropical storm.

An analysis of morning satellite imagery indicates that showers and thunderstorms have significantly increased near the center.

Maximum sustained winds are now only about 35 mph but the NWS stated in a press release, "Strengthening is forecast during the next 24 hours".

The National Oceanic and Atmospheric Administration released a tracking model this morning that shows the storm following the same path as last year's Katrina. Click on the image below to enlarge it.

Now, here's the thing…

It really doesn't matter whether or not this storm does any damage. After last year's dynamic duo of hurricanes that ravaged the gulf coast, speculators will be pushing gasoline futures higher as Ernesto moves into the gulf.

Unleaded gasoline for October delivery has already increased 4% over the past 24 hours. Take a look…

I fully expect gasoline futures to be strong throughout the day especially as we're going into the weekend. At this point you'd be hard pressed to find many traders will to go short on gasoline.

So, even if you have a half tank, I urge you to fill ‘er up before the gas stations raise prices. Like I said, it doesn't matter whether Ernesto turns into a category 5 hurricane or it turns out to be a dud, speculators are certain to push prices higher.

Buy gasoline now.

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