Gasoline futures (RBOB) have reached our 200-day moving average target set on March 3 [see: The Devil You Know] after having broken out of a falling flag pattern. Then…
…nothing would be as effective at punishing Russia and helping to solve the inflation problem as crashing the oil market…If oil does retreat, stocks should too. Reversing at the .786 would be a good start……as would RB reversing at its 1.618.
…and now.
By falling 33% since then, RB has given the economy several gifts, chief among them the opportunity to bring inflation down – if retail follows suit. EIA reported 4.272 per gallon for the month of March. July is shaping up as 4.41 – a tiny drop compared to futures prices.
The YoY increase in retail prices would remain elevated at 45%, down from June’s 60.7% but in line with average increases during Mar-May, when CPI averaged 8.46%.
Even if RB were to decline further, it face falling comps from August 2021. Retail prices remained steady from July to August. So, the onus is now on retailers to make a difference. And, something tells me they’re rather enjoying their windfall profits.
The top five oil companies – Shell, ExxonMobil, BP, Chevron and ConocoPhillips – saw their Q1 profits triple from 2021 to 2022. ExxonMobil, for instance, netted $2.7 billion in Q1 2021 and $8.8 billion in Q1 2022. It is expected to report over $10 billion in Q2. Taking into account futures prices, it is obvious that the Russian invasion of Ukraine has provided cover for what’s really just good old American greed.
Meanwhile, equities markets are trying to make sense of the ECB’s 50 bps rate hike (all the way up to zero!)
Hate to tell you, Ms. Lagarde, but 0% in an 8.6% inflationary environment with a 2% inflation target is still wildly stimulative – not to mention delusional.
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