Positioning in Trucking Companies

What if the price of Gasoil (diesel, distillate) halves?

Since March 2020, the price of Gasoil rose 7-fold.

But the real entry point for the ‘long’ trade was when it was meandering around $300 some 2 years ago.

Recently and today was not a time to be a buyer either.

The chart below shows that the Gasoil has already declined 40% from the recent highs which has been driven by various energy scarcity tensions.

For more than a year, I’ve been wittering about mean reversion and the 200 week moving average and how it (more so) beckons prices following parabolic price moves.

I’d say a 700% rise within 2 years could qualify for ‘parabolic’.

While Gasoil fell 9% last night to close at $1,074, what if it makes its way towards $600 and greets that 200 week moving average?

That’s a further decline of 44%.

Firstly, it would be deflationary.

Secondly, it will be beneficial to trucking companies.

Transportation indices and respective trucking stocks have been hammered.

Any decline in Gasoil prices will aide margins of trucking companies.

If I’m wrong and if the Gasoil price consolidates or rises, those stock prices have already factored in a drop in profits.

When supply chains shorten, trucking companies will have an added boost.

Keep in mind, that average will turn (relatively) higher soon, so let’s watch for a $650 target in the coming few months.

July 13, 2022

by Rob Zdravevski

rob@karriasset.com.au

#trucking #transportation #supplychains