Gas prices have recently declined more than 10% based on the national average price from AAA.  After hitting a 2019 peak of $2.90 in early May, we have now seen both a lower high and a lower low, taking prices back to levels last seen back in March.  Purely from a chart perspective, the outlook for gas prices doesn’t look positive as the recent trend lower follows a failed rally off the 2018 lows that stalled out just below the high from earlier that year.

In addition to a weak technical picture for gas prices, seasonal factors are also pointing to lower prices through year-end.  As shown in the chart below, when we compare prices so far in 2019 (red line) to a composite of the seasonal pattern going back to 2005 (blue line), this year is following the historical script relatively closely.  Prices rallied through early May but then lost momentum heading into the summer driving season.  Normally, prices peak around Memorial Day and basically move sideways with a downside bias during the summer.  This year, though, the move higher to start the year was much stronger than average, while the summer drift lower had more momentum behind it as well.  If the pattern continues to hold for the final four months of 2019, expect prices to keep falling.  Going back to 2005, gas prices have experienced a median decline of 9.8% from 8/22 through year-end with positive returns just 35% of the time.  That’s a move that would provide another boost to an already strong consumer. Start a two-week free trial to Bespoke Institutional to access our interactive Chart Scanner and much more.

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