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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-27 · 99 added, 88 removed, 350 unchanged (35% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the financial statements and the notes thereto of the United States Gasoline Fund, LP (“UGA”) included elsewhere in this annual report on Form 10-K.

The following discussion should be read in conjunction with the financial statements and the notes thereto of UGA included elsewhere in this annual report on Form 10-K.

Forward-Looking Information

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UGA believes these factors include, but are not limited to, the following:

changes in inflation in the United States;

movements in U.S.

and foreign currencies;

market volatility in the unleaded gasoline markets and futures markets, in part attributable to the COVID-19 pandemic that began in February 2020, and Russia’s invasion of Ukraine in February 2022.

changes in inflation in the United States, movements in U.S.

and foreign currencies, market volatility in the unleaded gasoline markets and futures markets, in part attributable to the COVID-19 pandemic February 2020, the Russia-Ukraine war and conflicts in the Middle East.

Forward-looking statements, which involve assumptions and describe UGA’s future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project,” the negative of these words, other variations on these words or comparable terminology.

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UGA has based the forward-looking statements included in this annual report on Form 10-K on information available to it on the date of this annual report on Form 10-K, and UGA assumes no obligation to update any such forward-looking statements.

Although UGA undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, investors are advised to consult any additional disclosures that UGA may make directly to them or through reports that UGA files in the future with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

UGA, a Delaware limited partnership, is a commodity pool that issues shares that may be purchased and sold on the NYSE Arca.

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“Next month contract” means the first contract traded on the NYMEX due to expire after the near month contract.

UGA seeks to achieve its investment objective by investing so that the average daily percentage change in UGA’s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Futures Contract over the same period.

UGA seeks to achieve its investment objective by investing so that the average daily percentage change in UGA’s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage changes in the price of the Benchmark Futures Contract over the same period.

UGA’s investment objective is not for its NAV or market price of shares to equal, in dollar terms, the spot price of gasoline or any particular futures contract based on gasoline, nor is UGA’s investment objective for the percentage change in its NAV to reflect the percentage change of the price of any particular futures contract as measured over a time period greater than one day .

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and foreign exchanges (collectively, “Futures Contracts”) and to a lesser extent, in order to comply with regulatory requirements, risk mitigation measures, liquidity requirements, or in view of market conditions, other gasoline-related investments such as cash-settled options on Futures Contracts, forward contracts for gasoline, cleared swap contracts and over-the-counter (“OTC”) swaps that are based on the price of gasoline, crude oil, and other petroleum-based fuels, Futures Contracts and indices based on the foregoing (collectively, “Other Gasoline-Related Investments”).

For convenience and unless otherwise specified, Futures Contracts and Other Gasoline-Related Investments collectively are referred to as “Gasoline Interests” in this annual report on Form 10-K.

For convenience and unless otherwise specified,

Futures Contracts and Other Gasoline-Related Investments collectively are referred to as “Gasoline Interests” in this annual report on Form 10-K.

USCF believes that market arbitrage opportunities will cause daily changes in UGA’s share price on the NYSE Arca on a percentage basis to closely track daily changes in UGA’s per share NAV on a percentage basis.

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Below are certain key regulatory requirements that are, or may be, relevant to UGA.

The various statements made in this summary are subject to modification by legislative action and changes in the rules and regulations of the SEC, Financial Industry Regulatory Authority (“FINRA”), the CFTC, the NFA, the futures exchanges, clearing organizations and other regulatory bodies.

The various statements made in this summary are subject to modification by legislative action and changes in the rules and regulations of the SEC, Financial Industry Regulatory Authority (“FINRA”), CFTC, NFA, the futures exchanges, clearing organizations and other regulatory bodies.

Pending final resolution of all applicable regulatory requirements, some examples of how new rules and regulations could impact UGA are discussed in “Item 1.

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These levels and position limits apply to the futures contracts that UGA invests in to meet its investment objective.

In addition to accountability levels and position limits, the NYMEX and ICE Futures also set daily price fluctuation limits on futures contracts.

In addition to accountability levels and position limits, the NYMEX and ICE Futures may also set daily price fluctuation limits on futures contracts.

The daily price fluctuation limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price.

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In addition, the ICE Futures maintains accountability levels, position limits and monitoring authority for its unleaded gasoline futures contracts.

If UGA and the other Related Public Funds (as defined below) exceed these accountability levels for investments in the futures contract for gasoline, the NYMEX and ICE Futures will monitor UGA’s and the other Related Public Funds’ exposure and may ask for further information on their activities including the total size of all positions, investment and trading strategy, and the extent of liquidity resources of UGA and the other Related Public Funds.

If UGA and the Related Public Funds (as defined below) exceed these accountability levels for investments in the futures contract for gasoline, the NYMEX and ICE Futures will monitor such exposure and may ask for further information on their activities including the total size of all positions, investment and trading strategy, and the extent of liquidity resources of UGA and the Related Public Funds.

If deemed necessary by the NYMEX and/or ICE Futures, UGA could be ordered to reduce its aggregate net position back to the accountability level.

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For the fiscal year ended December 31, 2023, UGA did not exceed any position limits imposed by the NYMEX and ICE Futures.

Futures Contracts and Position Limits

In October 2020, the CFTC adopted a rule to establish federal position limits for 25 core referenced futures contracts (comprised of agricultural, energy and metals futures contracts), futures and options linked to the core referenced futures contracts, and swaps that are

economically equivalent to the core referenced futures contracts (the “Position Limits Rule”).

The limits for futures contracts are currently in effect;

the limits for economically equivalent swaps will become effective in 2023.

Federal Position Limits

Part 150 of the CFTC’s regulations (the “Position Limits Rule”) establishes federal position limits for 25 core referenced futures contracts (comprised of agricultural, energy and metals futures contracts), futures and options linked to the core referenced futures contracts, and swaps that are economically equivalent to the core referenced futures contracts that all market participants must comply with, with certain exemptions.

The Benchmark Futures Contract is subject to position limits under the Position Limits Rule, and UGA’s trading does not qualify for an exemption therefrom.

Accordingly, the Position Limits Rule could negatively impact the ability of UGA to meet its investment objective by inhibiting USCF’s ability to effectively invest the proceeds from sales of Creation Baskets of UGA in particular amounts and types of its permitted investments.

Accordingly, the Position Limits Rule could inhibit UGA’s ability to invest in the relevant Benchmark Futures Contract and thereby could negatively impact the ability of UGA to meet its investment objective.

Margin for OTC Swaps

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Accordingly, UGA will be subject to the variation margin requirements of the Margin Rules for any swaps that it enters into.

However, UGA does not have material swaps exposure and, accordingly, UGA will not be subject to the initial margin requirements of the Margin Rules.

However, UGA does not have material swaps exposure under the Margin Rules and, accordingly, UGA will not be subject to the initial margin requirements of the Margin Rules.

Mandatory Trading and Clearing of Swaps

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exchanges to be offered and sold in the United States.

Infectious disease outbreaks like COVID-19 could negatively affect the valuation and performance of UGA’s investments.

An outbreak of infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and spread globally.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

COVID-19 resulted in numerous deaths, travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines and the imposition of both local and more widespread “work from home” measures, cancellations, loss of employment, supply chain disruptions, and lower consumer and institutional demand for goods and services, as well as general concern and uncertainty.

The spread of COVID-19 had a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial activity and market sentiment were impacted by the outbreak and government and other measures seeking to contain its spread.

COVID-19 had a material adverse impact on the gasoline markets and gasoline futures markets to the extent economic activity and the use of gasoline continues to be curtailed, which in turn had a significant adverse effect on the prices of Futures Contracts, including the Benchmark Futures Contract, and Other Gasoline-Related Investments.

Infectious disease outbreaks like COVID-19 may arise in the future and could adversely affect individual issuers and capital markets in ways that cannot necessarily be foreseen.

In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to such an outbreak, including the potential for significant fiscal and monetary policy changes, may affect the value, volatility, pricing and liquidity of some investments or other assets, including those held by or invested in by UGA.

Public health crises caused by infectious disease outbreaks may exacerbate other pre-existing political, social and economic risks in certain countries or globally and their duration cannot be determined with certainty.

In a rising rate environment, UGA may not be able to fully invest at prevailing rates until any current investments in Treasury Bills mature in order to avoid selling those investments at a loss.

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When interest rates fall, UGA may be required to reinvest the proceeds from the sale, redemption or early prepayment of a Treasury Bill or money market security at a lower interest rate.

UGA may lose money on its government of money market funds.

UGA may potentially lose money by investing in government of money market funds.

UGA invests in government money market funds.

Although such government money market funds seek to preserve the value of an investment at $1.00 per share, there is no guarantee that they will be able to do so and UGA may lose money by investing in a government money market fund.

An investment in a government money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation, referred to herein as the FDIC, or any other government agency.

An investment in a government money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”), or any other government agency.

The share price of a government money market fund can fall below the $1.00 share price.

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The price of the Benchmark Futures Contract started the year at $2.4783 per gallon.

The high of the year was on June 9, 2022 when the price reached $4.2762 per gallon.

The high of the year was on August 11, 2023 when the price reached $2.9649 per gallon.

The low for the year was on December 12, 2023, which was $1.9797 per gallon.

The year ended with the Benchmark Futures Contract at $2.4783 per gallon, an increase of approximately 11.40% over the year (investors are cautioned that these represent prices for gasoline on a wholesale basis and should not be directly compared to retail prices at a gasoline service station).

The year ended with the Benchmark Futures Contract at $2.1063 per gallon, an decrease of approximately (15.01)% over the year (investors are cautioned that these represent prices for gasoline on a wholesale basis and should not be directly compared to retail prices at a gasoline service station).

UGA’s per share NAV began the year at $59.75 and ended the year at $60.64 on December 31, 2023, an increase of approximately 1.49% over the year.

The Benchmark Futures Contract prices listed above began with the February 2022 contracts and ended with the February 2023 contracts.

An increase of approximately 11.40% on the Benchmark Futures Contract listed above is a hypothetical return only and would not actually be realized by an investor holding Futures Contracts.

The Benchmark Futures Contract prices listed above began with the February 2023 contracts and ended with the January 2024 contracts.

A decrease of approximately (15.01)% on the Benchmark Futures Contract listed above is a hypothetical return only and would not actually be realized by an investor holding Futures Contracts.

An investment in Futures Contracts would need to be rolled forward during the time period described in order to simulate such a result.

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During periods of contango, the price of the near month gasoline Futures Contract was lower than the price of the next month gasoline Futures Contract or contracts further away from expiration.

On days when the market was in backwardation, the price of the near month gasoline Futures Contract is higher than the price of the next month gasoline Futures Contract, or contracts further away from expiration.

During periods of backwardation, the price of the near month gasoline Futures Contract is higher than the price of the next month gasoline Futures Contract, or contracts further away from expiration.

For a discussion of the impact of backwardation and contango on total returns, see “ Term Structure of Gasoline Prices and the Impact on Total Returns ” below.

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New York time.

The Administrator uses the NYMEX closing price (determined at the earlier of the close of the NYMEX or 2:30 p.m.

York time) for the contracts held on the NYMEX, but calculates or determines the value of all other UGA investments, including ICE Futures contracts or other futures contracts, as of the earlier of the close of the NYSE Arca or 4:00 p.m.

UGA’s Administrator uses the NYMEX closing price (determined at the earlier of the close of the NYMEX or 2:30 p.m.

New York time) for the contracts held on the NYMEX, but calculates or determines the value of all other UGA investments, including ICE Futures contracts or other futures contracts, as of the earlier of the close of the NYSE Arca or 4:00 p.m.

New York time.

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As of December 31, 2023, UGA had issued 26,750,000 shares, 1,400,000 of which were outstanding.

As of December 31, 2022, there were 53,900,000 shares registered but not yet issued.

As of December 31, 2022, UGA has registered 80,000,000 shares since inception.

Commencing with the registration statement that went effective on January 27, 2023, UGA has an unlimited number of shares registered and available for sale.

On January 27, 2023, the SEC declared effective a registration statement filed by UGA that registered an unlimited number of shares.

As a result, UGA has an unlimited number of shares that can be issued in the form of Creation Baskets.

More shares may have been issued by UGA than are outstanding due to the redemption of shares.

Unlike funds that are registered under the 1940 Act, shares that have been redeemed by UGA cannot be resold by UGA.

As a result, UGA contemplates that additional offerings of its shares may be registered with the SEC in the future in anticipation of additional issuances and redemptions.

As of December 31, 2023, UGA had the following Authorized Participants:

Citadel Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities USA LLC, Goldman Sachs & Co., JP Morgan Securities LLC, Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company Inc., RBC Capital Markets LLC, SG Americas Securities LLC, and Virtu Americas LLC.

Citadel Securities LLC, Citigroup Global Markets Inc., Goldman Sachs & Co., JP Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company Inc., RBC Capital Markets LLC, SG Americas Securities LLC, and Virtu Americas LLC.

For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

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Total fees and other expenses excluding management fees

Total amount of the expense waiver

Expenses before the allowance of the expense waiver

Expenses after the allowance of the expense waiver

Total commissions accrued to brokers

Total commissions as annualized percentage of average total net assets

Commissions accrued as a result of rebalancing

Percentage of commissions accrued as a result of rebalancing

Commissions accrued as a result of creation and redemption activity

Percentage of commissions accrued as a result of creation and redemption activity

Portfolio Expenses.

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As a result, the amount of income earned by UGA as a percentage of average daily total net assets was higher during the year ended December 31, 2023, compared to the year ended December 31, 2022.

To the degree that the aggregate yield is higher, the net expense ratio, inclusive of income, will be higher/lower.

To the degree that the aggregate yield is higher, the net expense ratio, inclusive of income, will be lower.

The increase in total fees and other expenses excluding management fees for the year ended December 31, 2023, compared to the year ended December 31, 2022 was due primarily to an increase in professional fees and directors’ fees and insurance partially offset by a decrease in commissions.

The decrease in total commissions accrued to brokers for the year ended December 31, 2022, compared to the year ended December 31, 2021, was due primarily to a higher/lower number of Gasoline Futures Contracts being held and traded.

The decrease in total commissions accrued to brokers for the year ended December 31, 2023, compared to the year ended December 31, 2022, was due primarily to a lower number of Gasoline Futures Contracts being held and traded.

Tracking UGA’s Benchmark

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The average daily difference was 0.00% (or 0.0 basis points, where 1 basis point equals 1/100 of 1%), meaning that over this time period UGA’s NAV performed within the plus or minus 10% range established as its benchmark tracking goal.

The following two graphs demonstrate the correlation between the changes in UGA’s NAV and the changes in the Benchmark Futures Contract.

The first graph exhibits the daily changes in the last 30-valuation days ended December 31, 2022.

The second graph measures monthly changes since December 31, 2017 through December 31, 2022.

The following two charts demonstrate the correlation between the changes in UGA’s NAV and the changes in the Benchmark Futures Contract.

The first chart below shows the daily movement of UGA’s per share NAV versus the daily movement of the Benchmark Futures Contract for the 30 valuation day period ended December 29, 2023, the last trading day in December.

The second chart below shows the monthly total returns of UGA as compared to the monthly value of the Benchmark Futures Contract for the five years ended December 31, 2023.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

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UGA incurs expenses primarily composed of the management fee, brokerage commissions for the buying and selling of futures contracts, and other expenses.

The impact of these expenses, offset by interest and dividend income, and net of positive or negative execution, tends to cause daily changes in the per share NAV of UGA to track slightly lower than daily changes in the price of the Benchmark Futures Contract.

The impact of these expenses, offset by interest and dividend income, and net of positive or negative execution, tends to cause daily changes in the per share NAV of UGA to track slightly lower or higher than daily changes in the price of the Benchmark Futures Contract.

By comparison, for the year ended December 31, 2022, the actual total return of UGA as measured by changes in its per share NAV was 45.59%.

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However, if UGA’s daily changes in its per share NAV had instead exactly tracked the changes in the daily total return of the Benchmark Futures Contract, UGA would have had an estimated per share NAV of $59.50 as of December 31, 2022, for a total return over the relevant time period of 44.98%.

The difference between the actual per share NAV total return of UGA of 68.96% and the expected total return based on the Benchmark Futures Contract of 70.28% was a difference over the time period of (1.320)%, which is to say that UGA’s actual total return underperformed its benchmark by that percentage.

The difference between the actual per share NAV total return of UGA of 45.59% and the expected total return based on the Benchmark Futures Contract of 44.98% was a difference over the time period of 0.61%, which is to say that UGA’s actual total return outperformed its benchmark by that percentage.

UGA incurred expenses primarily composed of the management fee, brokerage commissions for the buying and selling of futures contracts, and other expenses.

The impact of these expenses, offset by interest and dividend income, and net of positive or negative execution, tended to cause daily changes in the per share NAV of UGA to track slightly lower than daily changes in the price of the Benchmark Futures Contract.

There are currently three factors that have impacted or are most likely to impact UGA’s ability to accurately track Benchmark Futures Contract.

The impact of these expenses, offset by interest and dividend income, and net of positive or negative execution, tends to cause daily changes in the per share NAV of UGA to track slightly lower or higher than daily changes in the price of the Benchmark Futures Contract.

There are three factors that typically have impacted or are most likely to impact UGA’s ability to accurately track the Benchmark Futures Contract in addition to the foregoing.

First, UGA may buy or sell its holdings in the then current Benchmark Futures Contract at a price other than the closing settlement price of that contract on the day during which UGA executes the trade.

In that case, UGA may pay a price that is higher, or lower, than that of the Benchmark Futures Contract, which could cause the changes in the daily per share NAV of UGA to either be too high or too low relative to the daily changes in the Benchmark Futures Contract.

In that case, UGA may pay a price that is higher, or lower, than the closing settlement price of the Benchmark Futures Contract, which could cause the changes in the daily per share NAV of UGA to either be too high or too low relative to the daily changes in the Benchmark Futures Contract.

During the year ended December 31, 2023, USCF attempted to minimize the effect of these transactions by seeking to execute its purchase or sale of the Benchmark Futures Contract at, or as close as possible to, the end of the day settlement price.

However, it may not always be possible for UGA to obtain the closing settlement price and there is no assurance that failure to obtain the closing settlement price in the future will not adversely impact UGA’s attempt to track the Benchmark Futures Contract.

However, it may not always be possible for UGA to obtain the settlement price and there is no assurance that failure to obtain the closing settlement price in the future will not adversely impact UGA’s attempt to track the Benchmark Futures Contract.

Second, UGA incurs expenses primarily composed of the management fee, brokerage commissions for the buying and selling of futures contracts, and other expenses.

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When short-term yields drop to a level lower than the combined expenses of the management fee and the brokerage commissions, then the tracking error becomes a negative number and would tend to cause the daily returns of the per share NAV to underperform the daily returns of the Benchmark Futures Contract.

USCF anticipates that interest rates may continue to rise over the near future from historical lows.

USCF anticipates that interest rates may continue to stagnate over the near future.

It is anticipated that fees and expenses paid by UGA may be lower than interest earned by UGA.

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During the year ended December 31, 2023, UGA did not hold any Other Gasoline-Related Investments.

If UGA increases in size, and due to its obligations to comply with market conditions and regulatory limits, UGA may invest in Other Gasoline- Related Investments which may have the effect of increasing transaction related expenses and may result in increased tracking error.

If UGA increases in size, and due to its obligations to comply with market conditions, regulatory limits, and risk mitigation measures imposed by its FCMs, UGA may invest in Other Gasoline- Related Investments, such as OTC swaps, which may have the effect of increasing transaction related expenses and may result in increased tracking error.

OTC swaps increase transaction-related expenses due to the fact that UGA must pay to the swap counterparty certain fees that UGA does not have to pay for transactions executed on an exchange.

Term Structure of Gasoline Futures Prices and the Impact on Total Returns .

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If an investor seeks to maintain a position in a near month futures contract and not take delivery of physical gallons of gasoline, the investor must sell the current near month futures contract as it approaches expiration and invest in the next month futures contract.

In order to continue holding a position in the current near month futures contract, this “roll” forward of the futures contract must be executed every month.

continue holding a position in the current near month futures contract, this “roll” forward of the futures contract must be executed every month.

Contango and backwardation are natural market forces that have impacted the total return on an investment in UGA’s shares during the past year relative to a hypothetical direct investment in gasoline.

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The chart below compares the daily price of the near month gasoline futures contract to the price of 13 th month gasoline futures contract (i.e., a contract one year forward) over the last 10 years.

When the price of the near month futures contract is higher than the price of

the 13 th month futures contract, the market would be described as being in backwardation.

When the price of the near month futures contract is higher than the price of the 13 th month futures contract, the market would be described as being in backwardation.

When the price of the near month futures contract is lower than the 13 th month futures contract, the market would be described as being in contango.

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this comparison ignores the potential costs associated with physically owning and storing gasoline, which could be substantial).

*USCF to confirm

Periods of contango or backwardation do not materially impact UGA’s investment objective of having the daily percentage changes in its per share NAV track the daily percentage changes in the price of the Benchmark Futures Contract since the impact of backwardation and contango tend to equally impact the daily percentage changes in price of both UGA’s shares and the Benchmark Futures Contract.

Periods of contango or backwardation have not materially impacted UGA’s investment objective of having the daily percentage changes in its per share NAV track the daily percentage changes in the price of the Benchmark Futures Contract since the impact of backwardation and contango tended to equally impact the daily percentage changes in price of both UGA’s shares and the Benchmark Futures Contract.

It is impossible to predict with any degree of certainty whether backwardation or contango will occur in the future.

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Gasoline Market .

During the year ended December 31, 2022, the price of the front month gasoline futures contracts traded in a range between $2.0491 and $4.2762.

Prices increased 10.37% from December 31, 2021 through December 31, 2022, finishing the fourth quarter of 2022 at $2.4595.

During the year ended December 31, 2023, the price of the front month RBOB gasoline futures contract traded in a range between $1.9797 and $2.9649.

Prices decreased (14.51)% from the end of December 31, 2022 through December 31, 2023, finishing the fourth quarter of 2023 at $2.1026.

USCF believes that over both the medium-term and the long-term, changes in the price of crude oil will exert the greatest influence on the price of refined petroleum products such as gasoline.

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During the year ended December 31, 2023, the price of the front month WTI crude oil futures contract traded in a range between $66.74 to $93.68.

Prices increased 6.71% from December 31, 2021 through December 31, 2022, finishing the year at $80.26.

Prices decreased (10.73)% from the end of December 2022 through December 31, 2023, finishing the year at $71.65.

The simultaneous demand and supply shocks from the COVID-19 pandemic and Saudi-Russia price war precipitated unparalleled risk and volatility in crude oil markets during the first half of 2020.

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Bullish fundamentals for crude oil prices were in place when Russia invaded Ukraine in February of 2022, causing the United States and other countries and certain international organizations to impose broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response.

in the oil markets, particularly in early March when WTI crude oil briefly rose to over $123.70 per barrel on March 8, 2022 then fell back to $95.04 per barrel on March 16, 2022, before rising and the falling again to end the first quarter of 2022 at $100.28 per barrel.

A bullish trend for crude oil emerged from mid-April through early June 2022 when WTI crude oil again topped $120 per barrel before, once again, giving up gains to end the fourth quarter at $80.26.

During the fourth quarter of 2022, crude oil prices exhibited multiple reversals, in contrast to strong gains during the first half of the year and a steady decline during the third quarter of 2022.

In 2022, U.S.

production rose to a peak of 12.2 mbd while OPEC production peaked at 29.95 mbd.

Despite increased demand and tighter supply (the U.S., Russia, and OPEC have still not returned to pre-pandemic production levels), bearish factors weighed on crude prices during the second half of 2022, including a record drawdown in the United States Strategic Petroleum Reserve, OPEC supply cuts, consumer responses to inflation, rising interest rates, a strong dollar, and concerns about global economic growth.

These factors continue to affect crude prices.

Conversely, the ongoing demand recovery for crude oil during a time when supply is lower could lead to higher prices over time.

Supply constraints, worker shortages, infrastructure and manufacturing energy usage, the war in Ukraine, and other geopolitical tensions, are factors that could contribute to future increases in crude oil prices.

Between competing bullish and bearish factors, crude could stay range bound or could exhibit significant movement up or down over the next few quarters.

The war in Ukraine and the potential for further supply disruptions and sanctions could lead to further volatility.

However, if a resolution to the conflict were to occur, volatility could decrease and prices could decline somewhat in a short period of time.

Conversely, crude oil prices may be highly reactive to developments as global buyers and sellers of crude reposition their relationships.

The War in Ukraine, sanctions and the corresponding disruption in the supply of Russian oil, have resulted in significant volatility in the oil markets, particularly in early March when WTI crude oil briefly rose to over $123.70 per barrel on March 8, 2022, then fell back to $95.04 per barrel on March 16, 2022, before rising and the falling again to end the first quarter of 2022 at $100.28 per barrel.

A bullish trend for crude oil emerged from mid-April through early June 2022 when WTI crude oil again topped $120 per barrel before, once again, giving up gains to end the fourth quarter of 2022 at $80.26.

Crude oil prices struggled to find direction during the first half of 2023 with seventeen notable price reversals, most of which exceeded $5.

Prices rose dramatically in the third quarter, from approximately $70 to over $90.

This strong bull market completely reversed in the fourth quarter and by December crude had plunged back to the $70 to $75 range.

crude oil production growth accelerated in late July and rose until the end of the year, finally surpassing pre-pandemic levels and reaching a record of 13.3 mbd in December.

Global crude oil supply rose above demand during the fourth quarter.

Russia and OPEC have still not returned to pre-pandemic production levels.

OPEC has fiercely supported prices with voluntary cuts by and production quotas on member nations over the last several years.

However, the November OPEC meeting was tumultuous and left the market uncertain of the cartel’s future commitment to cuts, despite an extension of voluntary cuts and expansion of collective curbs that amounted to 2.2 mbd until March 2024.

ahead, if OPEC’s strategic focus shifts from price support to market share defense, prices could come under further pressure.

Conversely, demand for crude oil has slowly increased since the onset of the pandemic in 2020.

According to the U.S.

Department of Energy, crude oil consumption reached an all-time high at the end of 2023 and is expected to continue increasing in 2024.

However, growth forecasts from the U.S.

Energy Information Administration (EIA) and the International Energy Agency (IEA) have declined from more optimistic projections earlier in 2023.

Nevertheless, ongoing demand growth during a time when OPEC continues to restrain supply could lead to stable or higher prices over time.

Supply constraints, worker shortages, infrastructure and manufacturing energy usage, the Russia-Ukraine war, the terror attacks by Hamas on Israel and ensuing conflict in the Middle East, and other geopolitical tensions, political unrest, and attacks or threats of attack by terrorists, are other factors that could contribute to future increases in crude oil prices.

Conversely, changes in OPEC policy, further non-OPEC production growth, and any sluggishness in the global economy could weigh on prices.

Geopolitical risk is expected to be particularly high in 2024.

The Russia-Ukraine war and Middle East conflict have the potential to create further supply disruptions and sanctions, which could lead to further volatility.

However, if a resolution to the conflicts were to occur, volatility could decrease and prices could decline somewhat in a short period of time.

Crude oil prices may also be highly reactive to developments as global buyers and sellers of crude reposition their relationships.

Unleaded Gasoline Price Movements in Comparison to Other Energy Commodities and Investment Categories .

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(BEUSG4 Index)

(FTSE World Index)

Large Cap US Equities (S&P 500)

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(BEUSG4 Index)

(FTSE World Index)

Large Cap US Equities (S&P 500)

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The correlations between gasoline, crude oil, natural gas and diesel-heating oil are relevant because USCF endeavors to invest UGA’s assets in Futures Contracts and Other Gasoline-Related Investments so that daily changes in percentage terms in UGA’s per share NAV correlate as closely as possible with daily changes in percentage terms in the price of the Benchmark Futures Contract.

If certain other fuel-based commodity futures contracts do not closely correlate with the gasoline Futures Contract, then their use could lead to greater tracking error.

If certain other fuel-based commodity futures contracts do not closely correlate with the Benchmark Futures Contract, then their use could lead to greater tracking error.

As noted above, USCF also believes that the changes in percentage terms in the price of the Benchmark Futures Contract will closely correlate with changes in percentage terms in the spot price of gasoline.

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USCF has evaluated the nature and types of estimates that it makes in preparing UGA’s financial statements and related disclosures and has determined that the valuation of its investments, which are not traded on a United States or internationally recognized futures exchange (such as forward contracts and OTC swaps) involves a critical accounting policy.

The values which are used by UGA for its Futures Contracts are provided by its commodity broker who uses market prices when available, while OTC swaps are valued based on the present value of estimated future cash flows that would be received from or paid to a third party in settlement of these derivative contracts prior to their delivery date and valued on a daily basis.

contracts prior to their delivery date and valued on a daily basis.

In addition, UGA estimates interest and dividend income on a daily basis using prevailing rates earned on its cash and cash equivalents.

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Income received from UGA’s investments in money market funds and Treasuries is paid to UGA.

During the year ended December 31, 2022, UGA’s expenses, pre and post expense waiver, did not exceed the income UGA earned and the cash earned from the sale of Creation Baskets and the redemption income exceeds expenses of Redemption Baskets.

During the year ended December 31, 2022, UGA did not use other assets to pay expenses.

To the extent, UGA’s NAV will be positively impacted.

During the year ended December 31, 2023, UGA’s expenses, pre and post expense waiver, did not exceed the income UGA earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

During the year ended December 31, 2023, UGA did not use other assets to pay expenses, post expense waiver.

To the extent income exceeds expenses, UGA’s NAV will be positively impacted.

Although permitted to do so under its LP Agreement, UGA has not leveraged, and does not intend to leverage, its assets through borrowings or otherwise, and makes its investments accordingly.

Consistent with the foregoing, UGA’s investments will take into account the need for UGA to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, UGA becoming leveraged.

If market conditions require it, these risk reduction procedures, including changes to UGA’s investments, may occur on short notice.

UGA does not and will not borrow money or use debt to satisfy its margin or collateral obligations in respect of its investments, but it could become leveraged if UGA were to hold insufficient assets that would allow it to meet not only the current, but also future, margin or collateral obligations required for such investments.

Such a circumstance could occur if UGA were to hold assets that have a value of less than zero.

USCF endeavors to have the value of UGA’s Treasuries, cash and cash equivalents, whether held by UGA or posted as margin or other collateral, at all times approximate the aggregate market value of its obligations under its Futures Contracts and Other Gasoline-Related Investments.

UGA’s investments in Gasoline Interests may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons.

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UGA may terminate at any time, regardless of whether UGA has incurred losses, subject to the terms of the LP Agreement.

In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures taken by UGA or third parties or otherwise that would lead UGA to determine that it could no longer foreseeably meet its investment objective or that UGA’s aggregate net assets in relation to its operating expenses or its margin or collateral requirements make the continued operation of UGA unreasonable or imprudent, or (ii) adjudication of incompetence, bankruptcy, dissolution, withdrawal or removal of USCF as the general partner of UGA could cause UGA, to terminate unless a majority interest of the limited partners within 90 days of the event elects to continue the partnership and appoints a successor general partner, or the affirmative vote of a majority in interest of the limited partners subject to certain conditions.

In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures (including those that may be taken by UGA, UGS’s FCMs, counterparties or other market participants) that would lead UGA to determine that it could no longer foreseeably meet its investment objective or that UGA’s aggregate net assets in relation to its operating expenses or its margin or collateral requirements make the continued operation of UGA unreasonable or imprudent, or (ii) adjudication of incompetence, bankruptcy, dissolution, withdrawal or removal of USCF as the general partner of UGA could cause UGA, to terminate unless a majority interest of the limited partners within 90 days of the event elects to continue the partnership and appoints a successor general partner, or the affirmative vote of a majority in interest of the limited partners subject to certain conditions.

However, no level of losses will require USCF to terminate UGA.

UGA’s termination would cause the liquidation and potential loss of an investor’s investment.

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In addition, the CFTC requires FCMs to hold in a secure account UGA’s assets related to foreign Futures Contracts.

In the future UGA may purchase OTC swaps, see “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk” in this annual report on Form 10-K for a discussion of OTC swaps.

In the future UGA may purchase OTC swaps, see “Item 7A Quantitative and Qualitative Disclosures About Market Risk” in this annual report on Form 10-K for a discussion of OTC swaps.

As of December 31, 2023, UGA held cash deposits and investments in Treasuries or money market funds in the amount of $86,471,643 with the custodian and FCMs.

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BNY Mellon’s fees for performing administrative services include those in connection with the preparation of UGA’s financial statements and its SEC, NFA and CFTC reports.

USCF and UGA have also entered into a licensing agreement with the NYMEX pursuant to which UGA and the other Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee to the NYMEX.

USCF and UGA have also entered into a licensing agreement with the NYMEX pursuant to which UGA and the Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee to the NYMEX.

UGA also pays the fees and expenses associated with its tax accounting and reporting requirements.

USCF had voluntarily agreed to pay certain expenses typically borne by UGA to the extent that such expenses exceeded 0.15% (15 basis points) of UGA’s NAV, on an annualized basis.

USCF terminated such expense waiver as of April 30, 2021.

This voluntary expense waiver was in addition to those amounts USCF is contractually obligated to pay as described in Note 4 to the Notes to Financial Statements in Item 8 of this annual report on Form 10-K and terminated on April 30, 2021.

In addition to USCF’s management fee, UGA pays its brokerage fees (including fees to an FCM), OTC dealer spreads, any licensing fees for the use of intellectual property, and, subsequent to the initial offering, registration and other fees paid to the SEC, FINRA, or other regulatory agencies in connection with the offer and sale of shares, as well as legal, printing, accounting and other expenses associated therewith, and extraordinary expenses.

In addition to USCF’s management fee, UGA pays its brokerage fees (including fees to FCMs), OTC dealer spreads, any licensing fees for the use of intellectual property, and, subsequent to the initial offering, registration and other fees paid to the SEC, FINRA, or other regulatory agencies in connection with the offer and sale of shares, as well as legal, printing, accounting, and other expenses associated therewith, and extraordinary expenses.

The latter are expenses not incurred in the ordinary course of UGA’s business, including expenses relating to the indemnification of any person against liabilities and obligations to the extent permitted by law and under the LP Agreement, the bringing or defending of actions in law or in equity or otherwise conducting litigation and incurring legal expenses and the settlement of claims and litigation.

Commission payments to an FCM are on a contract-by-contract, or round turn, basis.

Commission payments to FCMs are on a contract-by-contract, or round turn, basis.

UGA also pays a portion of the fees and expenses of the independent directors of USCF.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis