Every extended rate cut cycle ends the same way. Here’s what I mean.
Hey folks,
Quick note from the road — I’m in Jacksonville through Wednesday teaching some in-person classes this week — but I wanted to get this on your radar:
Keep your eye on crude.
We’ve got a two-sided squeeze shaping up:
- OPEC raised output by far less than expected. That’s not a flood of new barrels, it’s a drip. Less supply pressure than traders were hoping for usually supports prices, not the other way around.
- A Chevron refinery in California caught fire. Refinery outages don’t change the number of oil wells in the world — they choke the conversion of crude into products like gasoline and diesel. When you can’t process enough crude, you wind up with tighter gasoline supply in that region and prices jump.
Put those together and you’ve got an upstream story (crude supply isn’t loosening much) and a downstream story (gasoline supply just tightened in the most expensive fuel market in the country).
That’s why I’d expect West Coast pump prices to feel it first. California already has unique fuel specs, higher taxes, and limited local refining capacity — so when a big plant goes down, it bites fast. $8/gal isn’t out of the question if the outage drags.
A few plain-English pointers:
- Crude vs. gasoline: They’re related but not the same market. You can have plenty of crude and still see gasoline jump if refineries are offline.
- Regional matters: West Coast (PADD 5) is its own island. You can’t just backfill California overnight from the Gulf Coast — specs, logistics, and shipping all slow the response.
- What I’m watching: front-month crude futures, RBOB gasoline futures, weekly EIA product inventories, and any updates on the refinery’s timeline.
How I’m positioned around this:
- I’m not chasing headlines with big size. If crude holds firm and gasoline stays bid, I’ll look for measured opportunities in energy — but I want confirmation, not guesses.
- If you drive a lot in California, consider topping off before the weekend. It’s not a trade… just common sense.
The bottom line is this: A small OPEC increase, plus a major West Coast refinery outage is a bullish cocktail for fuel prices.
Eyes on crude, eyes on gasoline, and keep your risk tight until the dust settles.
Stay sharp,
— Geof
