Fuel Prices Fire Higher
As more Americans begin resuming normal routines, they will be disappointed to see something else returning to normal: prices at the pump.
Gasoline and diesel fuel prices have been exploding higher after bottoming out at the peak of the COVID-19 market panics.
Gasoline futures markets, which represent fuel prices without transportation and taxes, dropped to a 20-year low in March near 37 cents per gallon; prices had more than tripled by Friday, fetching $1.27. During that same period, diesel doubled from a low of 58 cents per gallon to $1.22 this week.
Prices at the pump won’t see the same swing; flat taxes and other expenses kept prices from bottoming as abruptly, and the rebound is being muted as well.
Fuel is being turbocharged by a precipitous drop off in oil production. The collapse in oil prices this spring caused oil producers worldwide to slash drilling, which is restricting petroleum supplies. Increasing driving demand worldwide is also pulling prices back up, especially from China, where oil consumption is almost back to pre-COVID levels.
Despite the rally, fuel prices are still down sharply on the year, bringing some much-needed relief to Americans struggling through the current economic crisis.
Wheat prices are dropping like a stone as farmers finish this year’s winter wheat harvest. The crop, which is planted in the fall and harvested in early summer, had been threatened by poor weather, but is now beating expectations with high yields.
Worse yet, American farmers are fearing a loss of foreign buyers for their bumper crop. The U.S. is a major wheat exporter, but competes annually with France, Russia, Canada, and Australia for export demand. Healthy-looking foreign crops and strong exports from competitors are dampening the outlook for American grain.
As farmers haul in their wheat crop, prices are near multi-month lows, with July Chicago wheat trading for $4.83 per bushel, and July Kansas City wheat garnering $4.31.
If farmers used forward contracts or futures and options markets earlier this spring, they had the opportunity to lock in prices nearly $1.00 higher, underscoring the necessity of using a marketing plan.
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