Posted in: Commentary,
by Patrick DeHaan on Mar 19, 2010 10:44 AM
March Madness is upon us. Not only are there more basketball games than I can take in for an entire year in the next few weeks, but there have been and will continue to be rising gas prices. March Madness basketball is a tradition to many across America, but are rising gasoline prices each spring as well known? They could be- rising gas prices aren't new, and have increased every year during this time. Some years we see huge "upsets" in gas prices that no one was able to predict, but if we're scoring brackets (or should I say gas price predictions), I'm still feeling comfortable half way through the first twenty minutes.
Spring time gas price increases are predicted by many analysts and prices are likely influenced by a majority of the predictions. If most analysts say prices will rise to new records, it certainly fuels the fire and adds more kindling to it. Many of these traders add piles of kindling, in hopes of being paid big bonuses when prices ultimately rise. I'm not one of those. I don't get any benefits for forecasting and analyzing gas prices. There aren't too many people that don't have a specific position on gasoline and oil prices, so if you find one that's not motivated by their wallet, it'd be a good idea to listen to what they think. It's too bad the market can't weed the analysts out that talk only in the interest of their wallet.
Having said that, a week or so ago I said average U.S. prices would rally to near $3/gallon. I feel comfortable with that position yet today, as prices hit an average of $2.817 in the United States. However, I realized I never gave a prediction for Canadian prices. While Canadian prices will follow the patterns I've identified already for U.S. prices, I haven't given a target for prices in Canada, so here it is: 113-121c/L. I'll admit that I feel more comfortable with my price forecast for the United States, so I may be off by a few cents per Liter in Canada. We'll have to see.
For those in the United States, I have to say that I've been a bit surprised with the recent rally we've seen here. Prices rallied to nearly $2.82 in no time- but I think we may see a week here and there that prices moderate. At the current date, I'd say gasoline prices heated up a bit too fast and may temporarily move lower before rising again in early-April. One concern about summer gasoline prices continues to be hurricane season. If you remember, 2009 was a non-event... hardly any storms were threats. 2010 promises to be much more active compared to last year, and while I don't expect a huge impact on the industry (who has been becoming less prone to such weather), I still expect traders to overreact to any storms... and with more storms forecasted, we could see an up-and-down end to the summer. I'd plan vacations for earlier in the summer to remove some of the risk of rising gas prices altering your vacation plans.