Monday, September 26, 2005

Wrong predictions like last Monday’s require you to go back and look at your calculations. The problem the past several weeks has been the “fudge factor” that takes into account the difference between the NYMEX futures prices and the wholesale prices in western Michigan. When Katrina struck, the FF was at least +20 cents, which contributed to prices of $3.39. But based on Friday’s price hike, the FF is currently -15 cents. Before Katrina, the FF varied at most between -10 and 10 cents, so you can see how this is making predictions impossible. So, let me just share what I see right now: with NYMEX prices down to $2.00 a gallon today, the 0-cent margin price (with FF=0, like last autumn) is $2.53, and the 20-cent margin price is $2.74. As I drive around town, I’m going to this to help decide whether or not to fill up the next two days, but prices could fall to $2.39 again, or up to $2.79. Maybe the crystal ball will be clearer later this week. The crystal ball has been broken — price hikes on Wednesday and Friday? Rumors of wholesale prices above $3?

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