Maybe this will get more interesting after the election

Comment on the October 3 prediction:  It was CORRECT.

Monday, October 17, 2016, 8:30AM:  Although oil has been up this month, gas prices have remained flat.  I suspect that we have some seasonality factors kicking in, as we tend to see lower prices during the latter part of autumn.  Here’s this weekend’s calculation:  Chicago CBOB is about $1.40, and ethanol is about $1.60, with the blend a typical 90/10 split.  Throw in all the taxes, and that puts the 0-margin price at about $2.12.  I saw that price near Holland and Wyoming yesterday, but we still are in the $2.20’s at most stations in the Grand Rapids area.  So, I think we are good for a few days, but I suspect a price reset would come along on Thursday.  That’s a prediction.

Note to “CMU Pitcher”:  the new Michigan gas tax law doesn’t kick in until 2017.  More details as we get closer. — Ed A.

Wholesale Prices Starting to Perk — Retail to Follow

Monday, October 3, 2016, 8:30PM:  Now that I have written in my last post about “nothing-burgers since July”, volatility is starting to perk up in the energy markets.  Oil is up 10% over the past two weeks, and wholesale gas prices have followed.  I’m calculating negative margins tonight, which almost always signals a price hike is coming up pretty quick.  Looking for $2.39-$2.49 as soon as Tuesday. –Ed A.

Nothing Burger

Comment on the September 19 prediction:  Mostly WRONG, as prices stayed low until late Sunday, when we got a surprise, slow-motion hike to $2.29.

Tuesday, September 27, 2016, 10:30PM:  In case you are wondering, I do try to play the Gas Game with integrity.  When, a week ago Monday, I predicted a mild hike was coming, I filled up the tank, and then watched prices continue to drip lower.  And, when I received the Gas Buddy alert Sunday afternoon about a surprise hike to $2.29, I filled up for $2.03.  That being said, our Big Red friends have been eating nothing-burgers since July, with mild hikes keeping us roughly in a $2.00-$2.39 range.  Oil prices have been stable, too.  So, now that the hike is done, why should we expect anything but lower prices for the rest of the week? –Ed A.

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:


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. (c) 2016 Frontier Theme