Colonial Pipeline Yawn

Comment on the September 8 prediction:  The hike didn’t occur until the 12th, to just $2.29, so call it WRONG.

Monday, September 19, 2016, 9:00PM:  You have probably heard about the Colonial Pipeline break in the South, leading to big hikes in states like Tennessee in the past week.  Here in the Great Lakes states, though, the effect has been mild.  In fact, my estimated price-to-retailers has been pretty flat all month, and retail prices have been steady, too.  As prices drop towards $2, margins are getting squeezed, and I expect we will see a re-set this week.  But there is no sign right now that it will be anything dramatic. — Ed A.

$2.39 again and again and again

Thursday, September 8, 2016, 8:00PM:  I saw this tweet this afternoon from TGG friend Patrick, and now that I have completed updating my spreadsheet this evening, I think he’s right.  We had a jump in wholesale prices today, bringing retailer margins to about 0 cents, by my calculations.  So, we are set up for a price hike on Friday, probably back to our default price this summer:  $2.39.  –Ed A.

Interesting stuff from the Marathon annual reports

I find the year end reports from Marathon fascinating. One of the most interesting things you can find there is the year end financial information for Speedway. At the moment, it goes back to 2011, although you can get numbers from 2009. Here is a chart of something I found very interesting:

Average Spike Line Margin % Margin Mthn. AR % M Mthn 2009 $ # SW Loc
2010 2.428 2.216 0.212 8.73 0.1207 4.97 0.1210 1358
2011 3.544 3.367 0.177 4.99 0.1308 3.69 0.1248 1371
2012 3.889 3.545 0.344 8.85 0.1318 3.39 0.1232 1464
2013 3.560 3.497 0.063 1.77 0.1441 4.05 0.1327 1478
2014 3.369 3.268 0.101 3.00 0.1775 5.27 0.1609 2746
2015 2.371 2.267 0.104 4.38 0.1823 7.69 0.1650 2766

Average = Indiana average for the year

Spike Line = Spike Line Average

Margin = Difference between Average and Spike Line

% Margin = Margin / Average

Mrthn. AR = Marathon’s reported margin for Speedway

% M Mthn = Mrthn. AR / Average

2009 $ = Mrthn. AR adjusted for 2009 dollars

# SW Loc = Number of Speedway locations

First thing that jumped out to me is that my predictions for the Spike Line have been all over the place. I’ve been frustrated about it, and it’s one of the many reasons I gave up on it.

Second thing is that the percent of margin is low. Even my highest year is still less than ten percent. To break even in any business, you need to make around 10% margin. As we all should know, however, they don’t make any money on the gas end, it’s usually all made inside on overpriced items.

But there is something interesting buried in there, and it’s pretty deep. Look at the margins adjusted for 2009 dollars. Notice the uptick in profit margin from 2013 to 2014. It almost jumps 3 cents. And it happens at about the same time they jump from about 1500 stores to almost 2800 stores.

Some would say that the jump probably corresponds with the even greater monopoly they have grabbed. If I hadn’t seen the following map, I would agree. But this map tells another tale:

Capture

They didn’t add more stores to Indiana, Ohio and Michigan, they expanded to the east and south. What I think is that they expanded into areas that had higher margins than ours, and thus it increased margins overall.

Something else to think about is how good Speedway stores are at selling gas than their Marathon partners. Speedway had almost 2770 stores when this report came out, Marathon almost 5600. But Speedway still outsold those Marathon stores 6 to 5.

Take a look over those annual reports and let us know what you think. And if you have an idea for a story, or something you’d like me to investigate further, leave a note in the comments, or email me at the address at the bottom left of this page.

TGG Adds A New Contributor

Comment on the August 21 prediction:  One of those 1/2 CORRECT, 1/2 WRONG ones.  We did get a hike, but it wasn’t until Thursday, and it was only to $2.39.

Sunday, August 28, 2016, 6:00PM:  As I noted at the beginning of the month, Bill Eby has taken a well-deserved hiatus from updating the Spike Line and Today in Oil pages here at TGG.  I didn’t realize how popular those pages were, until Bill stopped his work and the e-mails started coming in.  Well, I am please to introduce Craig Paull as a new TGG contributor.  He will be taking over for Bill.  Craig lives near me in western Michigan, and is also the I.T. Director for Kent County.  Welcome, Craig!

In gas prediction news, nothing to report right now.  Will we get some pre-Labor Day price-hike games?

Let’s Go Out To Eat

Comment on the August 14 prediction:  Yup, $2.39 on Monday, just as predicted.  CORRECT.

Sunday, August 24, 2016, 12:00PM:  These lower gas prices in 2016 have been nice!  According to this article, we’ve been using the extra money to grow their savings accounts and to go out to eat more.  But I wonder if we are now on a path back to $3 gas.  Since dropping to $40 a barrel at the beginning of August, oil prices have climbed to near $50.  That would be a 25% jump in a month if we get there this week.  Retail gas prices are being dragged along.  We were down to $1.79 in Indiana at the beginning of the month, now at $2.29.  Here in Michigan, although retail prices haven’t dropped much since the hike a week ago, wholesale prices have gone up, and I think we are looking at another re-set this week, to $2.49 a gallon. –Ed A.

Ohio’s margins getting thin

A bit of late notice, but Ohio’s Spike Line numbers are getting tight again. Wouldn’t surprise me if we saw some adjustments soon there, possibly as early as today. Michigan has a bit more cushion, but looks possible early next week unless we get some relief in spot price. – TS

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