Summer's officially here. Typically, this is the time when motorists steel themselves against the wallet-draining effect of higher petrol prices. Demand for motor fuel usually peaks at this time of year. Pump prices have, in fact, risen over the past week, but that's more likely a dead-cat bounce than the start of a genuine rally.

Why's that? Well, if you look back at prices over the past six weeks, you'll see that the nationwide average retail cost of gasoline peaked near $2.94 a gallon in mid-May. It's now hovering at $2.75 after prices slumped to $2.70 in mid-June.

There's just not a lot of pricing power in petrol. And why's that? Simple. There's more than enough of the stuff in inventory. Over the last four weeks reported by the U.S. Energy Information Administration, total domestic gasoline stocks are running above normal at 219.5 million barrels.

So what's normal? At this time of year, the four-week average is 212.1 million barrels. Now, that number's certainly not the highest ever. That distinction's owed to the early summer of 1993 when stocks totted up to 224.9 million barrels (for comparison's sake, the lowest inventory level at this time of year was notched in 2007 at 199.4 million barrels).

Total Domestic Gasoline Inventory

Gasoline supplies are plentiful—for now. Not at the glut level of 1993, but certainly closer to it than the scarcity of go-juice in 2007.

Refiners have been encouraged to produce and market gasoline because of fatter profit margins. That is, up ‘til now. Over the past couple of days, wholesale gasoline prices have moved to a discount versus distillates like heating oil and diesel. On a barrel-for-barrel basis, there's more money to be made breaking crude into heating oil than into gasoline.

NYMEX Product Cracks

Last week, the gross margin on a 3-2-1 operation (cracking three barrels of crude into two barrels of gasoline and one of heating oil) was 15.3 percent. Refiners concentrating production in middle distillates—so-called 2-1-1 operations cracking two barrels of crude into one each of gasoline and heating oil—earned only 15.0 percent. Now the situation is reversed. Refining on a 2-1-1 schedule makes for a gross margin of 16.0 percent versus a 15.8 percent profit for gasoline-heavy production runs.

Such pricing should discourage the production of gasoline, but that may not be immediately reflected in tomorrow's weekly inventory report from the Energy Information Administration. Because each report looks back over the week ending Friday, next week's tally will likely tell the tale better.

That should give us something to ponder as we pump gasoline into our tanks this week.