Anyone that feared demand destruction when WTI was at 115 $/bbl should continue to fear. The price of crude oil might have dropped like a rock last week but it will translate to almost no change in the price of gasoline at the pump since the fall in crude oil prices has been replaced by a surge of the gasoline crack.
If WTI was to move back to the price level of last Tuesday then we would be even deeper into the demand destruction zone due to the 10$/bbl increase in the gasoline crack since then. Bottom line: for the US driver, nothing has changed; or rather the prices at the pump are at risk of getting even worse than they were a week ago. Crude oil prices might be more than 10 $/bbl lower than a week ago but it will not translate into higher disposable income for US consumers.
The RBOB gasoline crack has been unstoppable, both versus WTI — where it hit a fresh record high of $40.001, according to Bloomberg — and versus Brent, as per the below chart from Olivier Jakob at Petromatrix, which shows it hitting a high of $21.79:
… because the gasoline crack (the difference between the price of crude and the price of gasoline — a key metric in determining whether there’s enough incentive for a refinery to process crude) is roofing.
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