Tuesday, May 24, 2005

What is this new world we live in, where Speedway’s price hikes aren’t obeyed? Enough competitors, and enough Speedway stations, have been ignoring price hikes, which is good for most of us, and prices have quickly found their way back towards the 0-cent margin price.

Now, why is this happening? In my last posting, I speculated that someone at Speedway was heading for termination. Another theory is related to the fact that wholesale prices have been in a downtrend since April 1. I had thought that retailers would be aggressive about higher prices during the downtrend, since they paid a lot for the gas in their tanks, and wouldn’t want to take a loss. Looking back over four years of data, however, it seems that retailers are very impatient during uptrends. (For instance, during the first half of 2004, there was a price hike practically every week.)

I wonder if the retailers are having a clearance sale without telling us. Two weeks ago, they were paying about $2.06 to fill the storage tanks under the pumps. Now, they see lower wholesale prices ($1.92 this morning), and someone is thinking, “Let’s keep prices low and sell some gas and clear this $2.06 gas off our books.” So, let’s go with this speculation today and make a prediction: most of the Speedway stations will hike prices later this week, probably to around $2.14. BP and Shell will match it. After that, it’s anyone’s guess, even with Memorial Day coming up. Speedway started a price hike on Wednesday the 25th to $2.15, so the prediction was CORRECT. Although it seemed initially that the price hike would hold, a price war broke out on 44th Street in Kentwood, with prices as low as $1.84 on Memorial Day.

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