This Chart Says the Gasoline ETF is in Trouble

ETF Trends

Prices at the pump have come in recent weeks.  Average the numbers put out by the American Automobile Association and the U.S. Energy Information Administration and American drivers currently pay about $3.23 for a gallon of regular gas.

Good news for drivers and consumers, but bad news for the U.S. Gasoline Fund (UGA) , which tracks near-month RBOB gasoline futures.  Even after Monday’s 2.2% spike, which it should be noted occurred on above average volume, UGA is still down almost 6% in the past 90 days.  [Gasoline ETF Drifts Lower After Summer Spike]

More pain could be on the way for UGA and not just because of increased U.S. oil production.

“Total miles driven has not recovered from its November 2007 highs. It is off almost 3 percent from its highs of more than 5 trillion vehicle miles driven annually. Persistently elevated unemployment of 7.3 percent means there are that many fewer people driving to work. And the pre-collapse shift to the exurbs — and their much longer commutes — suggests the trend toward ever-longer commutes may have topped out,” writes Barry Ritholtz for Bloomberg.

Ritholtz goes on to note that while some may argue that lower prices at the pump are good for consumers, attention needs to be given to the demand side of the equation.

The recent decline in West Texas Intermediate and the U.S. Oil Fund (USO) cannot be blamed entirely on increased production in the Bakken and Eagle Ford shales.  The Monday close for crude for December delivery was $4 below where WTI closed on Nov. 17, 2011, indicating demand is not where it should be at this point in an economic recovery.  [October's 10 Worst ETFs]

Slack demand has forced per capita miles driven return to levels not seen since 1995. With UGA  4.7% below its 200-day moving average, more trouble could be on the horizon for the fund.

Estimated Vehicle Miles Driven

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Chart Courtesy: dshort.com via Barry Ritholtz for Bloomberg

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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