85% probability Gas Above Current Price in 1 month

"There are 106 miles to Chicago. We have a full tank of gas, half a pack of cigarettes, it’s dark, and we’re wearing sunglasses."

-The Blues Brothers

Gasoline RBOB has 8 times the upside to downside

Outside of 2008, this is the most severe drop in Gas prices we’ve seen in over 30 years. In June of last year RBOB was at $3.13, and by January of this year prices had dropped 60% to $1.27. After a bit of recovery through June, prices have now settled back to $1.42 and they are approaching 6 year lows once again.

EidoSearch cranked up our numerical search engine get an objective gauge on where the price is likely to be in 1 month. To do this, we used the conditions in the current 3 month price trend to find statistically similar conditions in RBOB’s history and to get the full set of historical return distributions to see what typically happens next.

The chart below shows the 3 month price trend for RBOB, and the 1 month forward probabilities.

85% probability Gas RBOB will be above $1.39 in 1 month

We found 49 similar instances historically, and RBOB is up 77.6% of the time in these environments and the average return is 5.9%. The four worst tail instances per the table below are from 2008 and 2014. Otherwise, the downside is extremely muted vs. the upside.

Have a great week!