May 21 Weekly Update

5/21 – Higher fuel prices are back. AAA says that retail gasoline in the U.S. is currently averaging $2.94 per gallon vs $2.35 a year ago. Diesel is $3.18 vs $2.50 last year. OPEC and Russia have successfully reduced the global crude oil supply surplus from 400M barrels to just 43M over the past 2 years. Now, President Trump’s decision to re-impose sanctions on Iran further threatens oil supplies. In the U.S., shale oil producers are bumping up against congested pipelines and shortages of materials and workers. The EIA forecasts gasoline prices to average $2.90 this summer vs $2.41 last year and cost consumers an extra $40 per month. That won’t be enough to negatively affect spending habits for middle class Americans, but it will cannibalize half of their tax cut windfall. Lower income consumers will be more affected since they spend a larger percentage of their income on fuel.