- Oil prices have collapsed. Gasoline prices, not so much
- Zach Scheidt, our income specialist, explains why gas prices haven’t fallen much
- A safe, easy way to potentially collect over $30,000 a year of extra income
- Stocks tank… again
- How free the U.S. is compared with the rest of the world… the Shemitah strikes again… and more!
Makes perfect sense…
Oil’s plummeted 60% since last year, from around $100 to $41 in change.
Oil, down.
So naturally, the price of gasoline has also fallen off a cliff, dropping a whopping 26% over the same period.
Gasoline, not down nearly as much.
Wait… what? “Only 26%?” shrieks a figurative reader. “If oil has dropped 60%, shouldn’t gas prices have dropped much further than they have?”
You would think.
After all, gasoline is refined from oil. When oil trades lower, gasoline should follow in tandem. Right?
Right. In theory…
This discrepancy between low oil prices and not-nearly-as-low gasoline prices has motorists throughout America scratching their collective head. And looking to point a collective finger.
“I smell a rat. Cheap oil, expensive gas. So who’s ripping me off now?” thunders the aforesaid reader.
To put an even finer point on it, a barrel of West Texas Intermediate fetches 15% less than it did a month ago. But a gallon of regular is off only 5%.
Cherry on top: Not only have gas prices not fallen much lately — they’ve actually risen in some places. In fact, gas prices have spiked more than 50 cents a gallon in the Midwest recently, according to AAA.
And MarketWatch informs us they broke above $5 a gallon in parts of California last week.
Can’t blame Big Oil for this one. Name the company that manipulates the price of its products downward.
(We note in passing that we haven’t heard much talk lately about the oil companies engaging in “price gouging.” But we concede the possibility that we’ve been keeping the wrong company.)
So who — or what — is responsible for today’s high gas prices compared with oil? Our income specialist nonpareil, Zach Scheidt, has been on the case for a good solid month now. And he has the answer.
We spare you the drama and get right to it…
Good old-fashioned supply and demand. That’s the reason gasoline is much higher than it should be.
Here’s Zach:
“The biggest reason gasoline hasn’t declined as much as oil is because demand for gasoline remains strong. The U.S. economy is slowly recovering, and that means Americans are driving more miles.
“That means they’re buying more gasoline — and that demand is keeping the price higher — despite lower oil prices. Meanwhile, there’s a glut of oil right now keeping oil prices down.
“So if you’ve had a sneaking suspicion you’ve been getting robbed at the gas pump, you’re right. You’re still paying a lot more per gallon compared with the cost of producing that gallon.”
There’s your answer.
No oil companies leagued in conspiracy to plunder the consumer, no spat-wearing aristos making off with the loot. Just supply and demand. Hard to shake your fists at that.
So much oil, so little storage capacity…
As Zach explains, the real issue is the lack of storage capacity:
“A huge increase in oil production around the world has led to a supply glut.
“But there’s literally no place to put all of this oil!
“The storage tanks are filled to capacity. The amount of oil stored in the U.S. recently hit a peak of 470 million barrels — the highest level in more than 80 years!”
It’s easy to see why oil is so cheap these days. U.S. oil production went bananas due to the fracking boom. And increased Saudi oil production to undercut U.S. frackers only added to the bounty.
But there’s only so much storage capacity to contain it all. And more importantly, there are only so many refineries to convert all that oil to gasoline…
The refiners are sitting in the “catbird seat” these days, according to Zach.
The reason’s simple. Oil’s down 60%. But gas prices are only down around 26%.
That means the refiners can buy oil at a steep discount, do some sorcery to turn it into gasoline and sell that gasoline for a much higher relative price.
It’s like buying a barrel of oil, putting it through the wringer and then selling it for over twice as much. Good work if you can get it.
“Think about that for a second,” says Zach. “Refiners are enjoying a 60% decline in the cost of oil, and they have had to take only a 26% haircut on their gasoline sales.
“With the price of oil dropping significantly more than the price of gasoline, refiners are enjoying wider profit margins on every gallon of gas produced.”
No wonder the refiners are sitting in the catbird seat. They’ve got rocketing demand for their product coupled with mile-wide profit margins on every sale they make.
(For the record, the reason gas prices spiked in the Midwest is because a key refinery went down in Indiana, and could remain out of action for a month.)
Add it all up and it means refiners are the perfect investment right now.
Most investors assume that all energy-related stocks are dogs right now. If it touches oil, it’s tarnished. Sort of a reverse Midas touch.
But as the foregoing demonstrates, these investors are missing the mark. Badly. Refiners are coming up flowers these days because of cheap oil combined with strong gasoline demand.
And Zach has identified the best refiners that are reaping these windfall profits right now. They’re still cheap because the investing public has yet to discover them. But when it does, these stocks could go haywire. Hard to think of a better time to buy.
Better yet, Zach has the perfect strategy to squeeze even more money out of these companies. Within the past 30 days, he’s shown his readers how to collect $550 of income from refiners.
But that’s just for starters. Zach’s readers have been able to collect as much as $21,916 of safe, easy income so far this year (not just from refiners).That means they’re on pace to collect over $30,000 by year’s end. Easily and with very low risk.
Zach calls it his “perpetual income strategy.” To learn more about it, click here.
[Ed. note: This is a time-sensitive opportunity. Our publisher informs us it will be removed within days, so please take action ASAP. Please click here now, while it’s still up.]
Now to the markets…
Another bloodbath. Here’s the butcher bill:
Dow — down 220.
S&P — down 24.
Nasdaq — down 88.
Care for dessert?
Reuters’ take on it all: “Wall Street fell sharply for the third straight day on Thursday after the Federal Reserve highlighted global growth concerns and as finance stocks declined on speculation that the central bank would not raise interest rates in September.”
There you have it. Take it as you will, but our resident chart chimp, Greg Guenthner, has been warning his readers to watch out for Dow 17,170, a key resistance level. Once the Dow slips beneath it, look out below, says Greg.
What’s the Dow at writing? 17,082. As we said, take it as you will.
Oil? We covered that. Meanwhile, gold’s up 21 bucks today. Must have something to do with speculation that the central bank will not raise interest rates in September…
USA! USA!
The libertarian-leaning Cato Institute, in cahoots with Canada’s Fraser Institute and Germany’s Friedrich Naumann Foundation for Freedom, just released its annual Human Freedom Index.
It evaluates each nation on the amount of personal and economic freedom it offers its citizens.
The top 10 in this year’s report? In order: Hong Kong, Switzerland, Finland, Denmark, New Zealand, Canada, Australia, Ireland, the United Kingdom and Sweden.
Iran brought up the rear. You may have guessed North Korea, but researchers didn’t have enough access to North Korean data to even evaluate it. Who knows, maybe North Korea is a brother to Hong Kong or Switzerland. We just don’t have enough information to tell.
Oh…
The Land of the Free? No. 20. Right between Mauritius and the Czech Republic.
But just wait till next year…
Returning to the Shemitah…
A reader raps his own knuckles for a slight error: “When discussing the Shemitah, Jonathan Cahn did not declare a specific date when God would act. In specifying a date, I did a disservice to the fundamentalists. Only God knows when He will act. Thank you for permitting the dialog.”
The 5: Anytime. For the record, we don’t know either when God will act. We begin to harbor suspicions, though.
Meanwhile, we were dealt with as follows by one reader, first quoting our take on the thing: “No insult intended here… but near as we can tell, the Shemitah phenomenon is driven mostly by fundamentalists who feel like they missed out on all the fun more heathen types had with Dan Brown novels and the 2012 Mayan calendar business.”
Writes the reader, “It is improper to begin a sentence with ‘No insult intended here’ and then follow it with an insult. I recommend that you first read the book and then throw it out there as a possibility. If the prediction doesn’t come to fruition, then you may further comment.
“In addition, insults are not very professional for your ‘distinguished’ organization.
“May God bless you.”
The 5: We thank you for the kind benediction. We’re not sure this one will crack our reading list, but we tend toward a skeptical stance on such things. As the redoubtable Yogi Berra reportedly quipped, “It’s tough to make predictions, especially about the future.”
And we are a “distinguished” organization. For good or ill is another question entirely.
Switching gears…
Reacting to yesterday’s post from the reader who’s “sad and scared” about the future of the country, another reader writes, “To the sad and scared reader who brings up the poor education (especially in politics/history), I’m afraid that ‘dumbing down’ John Q. Public started as far back as the 1950s.
“I’m 65, and was taught how wonderful and brilliant were Teddy, Woodrow and FDR. Those three started the progressive movement that continues today. Part of the education strategy was to produce unskilled, nonthinking factory workers.
“And this can be done while fattening the wages and benefits of the teachers who vote for the progressives. Be sad. Be scared. We are going down the toilet — eventually. Our doom is imminent… or is it inevitable?”
The 5: Death is inevitable. But it would be nice to delay it as long as possible.
Another reader writes, “In light of Obama’s 2008 remarks about visiting 57 states, and similar ‘misunderstandings’ among the denizens of Congress, it strikes me all candidates for federal office (AND delegates to the Electoral College) should be required to pass the civics examination required of naturalized citizens.
“It is a representative democracy, after all, in part because the Founders figured even the land-holding males allowed to vote back then likely did not have the time nor skills to directly serve their fellow citizens’ best interests. Would be no different than requiring your attorney to pass the bar and your physician to pass the medical boards. Duh!”
The 5: If the average congressman is representative of the country as a whole, heaven help us. Nothing else can.
Best regards,
Brian Maher
The 5 Min. Forecast
P.S. We touched upon this earlier, but this is the easiest way we’ve ever found for you to make an extra $1,000 per month — bare minimum.
In fact, we’re so confident that you can make — at least — $1,000 per month if you follow the strategy outlined on this page… that we’ve convinced our publisher to guarantee it.
Yes, we’re guaranteeing you will be shown how to make a minimum of $1,000 a month using this strategy.
But only if you hurry.
We cannot guarantee how long our publisher will allow us to keep this video online. We hear it could be days.
If you’re at all interested, you need to click here to see how to make a minimum of $1,000 per month — guaranteed.