There is an impending threat that could hit the United States as early as this summer, and the perfect storm of economic and industry headwinds are starting to come together. As America begins to exit the COVID-19 pandemic thanks to one of the more successful nationwide vaccine rollouts in the world, there is a growing fear of a looming gasoline shortage that is about to take place. With millions of people being unleashed back into society from a year-long coronavirus quarantine, there is going to be a collective itch to get on the road and drive. The only problem is, there may not be enough gas to go around.
Not only could an over demand for gasoline dwindle the existing supply, but there are real microeconomic factors that are coming into play too. Specific to the gasoline industry is the fact that gasoline delivery truck drivers retired or quit en masse due to the COVID-19 pandemic. For more than a year, barely anyone needed to drive, or at least not as frequently as we did pre-pandemic. With a massive dip in the demand for gasoline, a good percentage of delivery drivers left their positions without a desire to have to deal with COVID safety precautions. Now that demand is roaring back, gasoline delivery companies are scrambling to find drivers who require a special certification that is not immediately attainable.
The recent cyber-attack of Colonial Pipeline by the alleged Russian hacker group DarkSide has left America reeling. While the hack left the pipeline offline for just the weekend, it still managed to delay the delivery of up to 5 million barrels of crude oil to a supply line that supplies 45% of the diesel, petrol, and jet fuel to the East Coast. This attack has only compounded industry concerns of a gasoline shortage, with early estimates of the national average cost per gallon rising to over $3.00. The prices could soar even higher if there are further events that affect the supply chain like hurricanes in the Gulf Coast.
So what does this mean for investors? USO (NYSEArca:USO) is the ETF that is linked directly to the price of crude oil in America. The fund made headlines in April of 2020 as the demand for crude oil declined so much that the price per share of the ETF went as low as $2. The USO actually had to institute a 1 for 8 reverse split, so that the fund would avoid completely collapsing. The actual price of crude oil per barrel went negative as a major oversupply left the oil industry with a severely devalued commodity. Now as the world slowly begins to emerge from COVID-19, the surge in demand could send shares of USO through the roof depending on the simple supply and demand laws of basic economics. Savvy investors may take the fear of a looming gasoline shortage and grab some shares of USO, as the fund is tied directly to the price of the futures contracts for crude oil one month into the future.