Expert: Gasoline Could Rise Another 20-30 Cents

Oil has pushed into triple digits as uncertainty around White House policy and Persian Gulf tensions, including a Strait of Hormuz closure, disrupts supply expectations. Kevin Book warned gasoline prices could rise another 20 to 30 cents, while shortages are already emerging in cooking fuels for Asian importers and global shortfalls may follow within weeks to months. The shock is broadly negative for energy consumers and inflation-sensitive sectors, with potential market-wide spillovers.

Analysis

The market is underpricing how quickly a Gulf chokepoint shock propagates from crude into refined products and then into industrial margins. The first-order move is already in oil, but the more durable dislocation is in naphtha, LPG, and diesel-linked freight/cold-chain inputs, where Asian importers have fewer substitutes and less inventory flexibility. That creates a relative winner set in non-Gulf supply chains with spare export capacity, while globally exposed manufacturers and transport names face a margin squeeze that can show up before headline CPI does.

The key second-order effect is policy reflexivity: once gasoline starts biting household expectations, governments tend to respond with release, subsidies, or diplomatic pressure, which can cap the upside in crude even if physical flows remain disrupted. That means the trade is likely better expressed in refiners, airlines, trucking, and consumer-discretionary names than by chasing outright long crude after a sharp gap up. If the Strait remains constrained beyond a few weeks, the bigger risk is demand destruction and forced rationing rather than a linear continuation higher.

Contrarianly, the consensus may be too anchored to crude as the only relevant price. In a true shipping-lane shock, the biggest earnings revisions often come from the spread between feedstock and end-product prices, not the barrel itself, especially where inventory turns are high. The market may also be slow to price in a policy de-escalation path: any credible maritime security response or backchannel compromise could unwind the geopolitical premium quickly, leaving late longs in spot energy exposed.

Key Decisions for Investors

• Short US airlines via JETS or individual carriers (DAL/LUV) for 2-6 weeks; upside is fuel-cost margin compression and demand elasticity, with risk capped if crude retraces on diplomatic headlines.
• Buy XLE / short XLI as a 1-3 month relative-value pair; energy retains pricing power while industrials absorb input-cost pressure and potential freight disruption.
• Long refined-product exposure versus crude: consider XOP-neutral long RYE or fuel-sensitive refiners only if cracks remain wide; use call spreads on refinery names for a 1-2 month window, but avoid outright long crude after the initial spike.
• Hedge consumer inflation passthrough with short XLP? Better expressed as short retailers/discretionary importers (XRT or specific names) over the next quarter; gasoline and shipping costs hit lower-end consumers first, reducing discretionary spend.
• If Brent extends another 8-10% without a supply response, take profits on speculative energy longs and shift to options-defined risk; the non-linear reversal risk from policy intervention rises sharply above that level.