I’ve been traveling a bit, so I didn’t post on Monday. Futures prices have been pretty stable the past few weeks, keeping retail prices between the mid $1.40’s and $1.59. Since they hiked prices on Thursday to $1.59, expect prices to drift lower next week. (I was driving up I-94/I-196 from Indiana on Thursday, and prices were all in the $1.40’s until I got to Grand Rapids. What, are we the first place on the whole Lake Michigan shore region to raise prices?) If prices drop in the $1.40’s next week, then there will be a price hike next Thursday. Otherwise, there shouldn’t be. I’ve been in Traverse City since Sunday, and I knew my prediction was in trouble on Tuesday morning, first when I saw that oil prices had pushed up to $30.60 a barrel, and then when I saw gas stations there raise prices from $1.49 to $1.67. Interesting to note that a similar hike occured in Grand Rapids late Tuesday, to the same $1.67. So, my prediction was dead WRONG.
Month: May 2003
If you thought winning in Iraq meant seriously lower gas prices, so far you are mistaken. Wholesale prices did drop significantly since mid-March, but they have climbed 15% lately (thank you, weak US dollar!), and we are back to where we were at the beginning of April. Back then, prices were in the $1.40’s and $1.50’s. Now, with the Chicago Summer Premium in effect, we can expect prices in the $1.50’s and $1.60’s. I expect another price hike later this week, to about $1.66. Prices rose on Thursday, May 22 to $1.59, so I was CORRECT about the price hike, but WRONG about the price.
As you can see above, I am tinkering with my formula, which includes changing the wholesale price estimate, adding in the extra money for the reformulated gas required in the Chicago region, and adding in some miscellaneous charges that were brought to my attention the past year. Given all that, with a 20-cent margin, the expected gas price is $1.60. Currently, prices in town range are all in the $1.40’s, setting up for a price hike today, tomorrow, or Thursday. That’s my prediction, but I’m not sufficiently comfortable with the new formula yet. On Thursday, prices rose to $1.58 around Grand Rapids, which is close enough to $1.60 for me to say CORRECT! If I continue to be 2 cents off as the summer gets rolling, I’ll adjust my formula.
Where the heck did that price hike come from yesterday? I’ve suspected for a while now that Speedway et. al. has moved to being more aggressive about protecting their margins, and it seems that is the case. Well, I guess we can count on no price hike this weekend.
On March 7, wholesale unleaded gasoline was $1.16 a gallon. Last Friday, it was $0.77. That’s a 33% drop in wholesale prices. Retail prices have been slow to adjust. Take 33% off of the high of $1.80 in March, and you get $1.20. Of course, it isn’t that simple, and retailers have gasoline sitting in their tanks they paid more for a few weeks ago, but as new supplies come into town, prices should continue to drop. I don’t see a price hike this week, just drops of 1 to 3 cents a day. Next week, we’ll start thinking about the “10-cent Chicago Summer Premium”. A price hike to $1.49 spread slowly across the area on Thursday, so I was WRONG!