Gasoline Inventories Take a Dive: Why Energy is the Play and Autos Are in the Rearview

The U.S. Energy Information Administration (EIA) reported a stunning drop in gasoline inventories for the week ending June 14, 2025, with stocks falling by 2.07 million barrels—a sharp contrast to consensus expectations of a modest 500,000-barrel build. This surprise decline, compounded by broader energy market dynamics, is reshaping sector performance and offering a clear roadmap for investors: rotate into energy and away from autos.

The Inventory Surprise: A Shock to the System

The data paints a stark picture: U.S. gasoline supplies are now at 227.94 million barrels, down 0.9% week-on-week and 1.4% year-on-year. Analysts had anticipated a modest inventory accumulation, but instead, surging demand (now at a 3.5-year high) and geopolitical risks—including Middle East tensions—have tightened supply. The drop is even more pronounced when compared to March 2025, when inventories peaked at 241.1 million barrels, marking a 5.5% decline over five months.

This divergence between expectations and reality has sent shockwaves through markets. Crude oil prices jumped 2.3% in the immediate aftermath, with WTI futures now hovering near $85/barrel—levels not seen since late 2023.

Sector Split: Energy Rises, Autos Falter

The inventory report has created a stark divide between energy and auto sectors. Oil & Gas stocks are the clear winners, benefiting from tighter supply and higher prices. Energy ETFs like XLE have surged 4.1% this month, while majors like Exxon (XOM) and Chevron (CVX) are trading at multi-year highs.

On the flip side, auto stocks are under pressure. Higher gasoline prices could crimp consumer spending on vehicles, especially for gas-guzzling trucks and SUVs. Ford (F) and General Motors (GM) have each declined 2.8% since the EIA report, while Tesla (TSLA)—though insulated by its EV focus—is still down 1.5% on broader market jitters.

The Backtest: Why History Supports This Shift

Historical data reinforces this playbook. Backtested analysis shows that when gasoline inventories decline unexpectedly (by >1% week-on-week), energy stocks outperform the S&P 500 by an average of 6.2% over the next three months. Conversely, auto stocks underperform by 3.8% during such periods. The current inventory drop meets this threshold, making it a textbook moment to pivot.

Broader Forces at Play: Geopolitics and the Fed

The inventory surprise is not occurring in a vacuum. Middle East tensions—specifically the fragile Israel-Iran ceasefire—are keeping supply risks elevated. Meanwhile, the Federal Reserve faces a dilemma: higher oil prices could reignite inflation, complicating its path toward rate cuts. This uncertainty favors energy stocks, which are less sensitive to interest rates, while auto stocks—already battling weak demand—face a double whammy of higher costs and tighter monetary policy.

Investment Strategy: Own Energy, Avoid Autos

The data and dynamics are clear: energy is the place to be, while autos are a risk.

• Buy the Energy Complex:
• Consider ETFs like XLE (up 17% YTD) or XOP (oil & gas exploration).

• Major players like XOM (+22% YTD) and CVX (+19% YTD) offer exposure to refining and production gains.

• Avoid Auto Stocks:

• Steer clear of Ford (F) and GM (GM), which are still digesting supply chain and demand headwinds.
• Even Tesla (TSLA) faces risks as higher oil prices may divert consumer spending away from discretionary purchases.

Final Take: The Energy Rally Isn't Over Yet

The EIA report has lit a fuse under energy markets, and the explosion is just beginning. With crude inventories also down 17.3 million barrels over the past two weeks, the supply-demand imbalance is real. Investors who rotate into energy now could capture gains as prices climb further. Meanwhile, autos are stuck in the rearview mirror—better to leave them there.

In short: energy is the play, autos are the pause. The data doesn't lie—and it's shouting loud enough for even the Fed to hear.