Month: March 2007

The Big Prediction… as requested.

A quick note on filling up before I get into the “Big Prediction”:
Keep your tanks near full. Wholesale prices have climbed to around 2.05, which might give us a hike to 2.69-2.72. Rather safe than sorry! Thanks to Meijer for keeping Speedway in check. Meijer raised prices to 2.55 while Speedway tried to jump to 2.65. Many Speedway locations had to come back down.

Now… on to the “Big Prediction”

I’m sure with summer coming and gas prices hovering mid-$2, you’re all curious whats in store for later months. Before I start this prediction, I’d like to explain how hard it is to be extremely accurate. It is tough- almost like a Winter Snowfall estimation in October. Predicting summer gasoline prices can be just as difficult.

So… here we go.

It is my prediction that this summer will not bring $3 *average U.S.* gas prices like that past few summers. With summer months ahead of us, I would not be surprised to see other folks (analysts, whatever you call them) say we’ll see record high oil and gasoline prices. Before you believe these analysts, check if they hold stock in oil or gasoline companies. Many times they do and thus try to send prices higher.

Lets take a trip back in time to understand my prediction.

About a year ago, Grand Rapids prices were about the same, near 2.65. The price rise we’ve seen since January is mostly thanks to continued refinery maintenance. Last year at this time there were many more problems thanks to Hurricanes Katrina and Rita mowing over the Gulf. Last year the U.S. was also dealing with the phasing out of the ground-water contaminating additive MTBE. We also dealt with ultra high ethanol prices as it was learned MTBE would be replaced with an ethanol-blend.

Back to this year. No lingering hurricane effects, no switching additives or blends. Just a loss in production from refinery maintenance, which we should see come back online within 3-4 weeks. However, we’re seeing the same price as last year, so whats the deal? We’re in store for a correction I’d say. Read on…

Last summer after we cleared up the problems from past hurricanes and the new ethanol blend, the wholesale gasoline contract had a HUGE selloff. Remember? We didn’t have a price hike for nearly a MONTH here in Grand Rapids as prices slid roughly 85 cents last fall.

Now that we’ve cleared out those past hurricane and additive problems, I can’t see how prices can continue to climb. Besides the same news we’ve been dealing with for what seems years now (Iran, OPEC, higher demand, etc) there is nothing new. Even BP has their Alaska pipelines all figured out by now. Could we see a correction in wholesale prices once refiners start their all-out gasoline production in 3-4 weeks? I think we just might see that correction.

Doesn’t it seem that recent headlines that had nothing to do with gasoline may be effecting us way more than it should? (IE- Iran taking 15 British soldiers) Why did gasoline futures go up 8 cents that day? Some financial firms seem to be running that headline nonstop in hopes of fueling a gasoline price rally.

I’m almost waiting for a oil company to come out and give some news of a refinery having problems in the next 3-4 weeks and then having prices spike another 15 cents. That may happen as they try and get a bigger margin out of oil, but I think we’re near the top, folks.

I think this year that Spring/Early Summer will see the highest gas prices, and remember- we still have a month or two before its over.


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Get gas, prices rise tomorrow!

Seeing as how the last two weeks I called for hikes on Thursday or
Friday, I waited this week to make the Monday predict. So… heres the
Monday predict (and I’m pretty certain this one will be Monday)

Prices have risen to near $2/gal wholesale as worries from Iran drive
prices higher, as well as longer than expected refinery maintenance,
and other bogus reasons why prices have gone up.

I suspect we’ll see $2.69 Monday. Be SURE to fill up today for $2.39 around Leonard/Fuller and Michigan/Fuller.

Refinery utilization went up as I predicted last week to 86.1%. I
overshot it just a touch, estimating 87%. I suspect we’ll see
utilization continue to climb to 87-88% in the next DOE report.

Fill’er up!

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Fill ‘er up on Sunday night!

Saturday, March 24, 4:15 PM:  Wholesale prices surged at the end of the week to almost $2 a gallon, which puts the 20-cent margin price at $2.73 this weekend.  With prices in the $2.39-$2.59 range this weekend, I would fill up on Sunday night, because prices are going up on Monday or Tuesday to somewhere north of $2.67.  At Fuller and Leonard, prices are $2.39 right now.

Price hike came a few days later than I expected.

Comment on last week’s prediction: Prices actually dropped to $2.39 by the weekend, making this prediction WRONG.

Monday, March 18, 2007, 4:30 PM: Last night, I’m thinking, “Well, I could predict a price hike for the third time in a row, and maybe I would be right this time.” I didn’t make that posting, but this time they did decide to go with the price hike. The situation I described last Wednesday had not changed, except that prices were down at $2.39 and lower around town this morning, so a price hike today fit the pattern. So, for the third time in five days, I bought 4 gallons to top of my tank, and this time it was the right thing to do. Predictions used to be easier when most price hikes were on Thursday and none were on Friday — one could get a decent read of things Tuesday morning and make a reasonable prediction. I sense a need to adjust my prediction methodology, after more than two years of price hikes occurring any day of the week. Sounds like a good project after final grades are in at the end of April.

I concur about a price hike on Thursday

Comment on last week’s prediction:  We didn’t get a price hike on Monday, so the prediction was WRONG.

Wednesday, March 14, 2007, 7:30 PM:  Using this afternoon’s closing prices, we have a 0-cent margin price of $2.45 and a 20-cent margin price of $2.66.  As there are a lot of places in town with gas below $2.50, I predict a price hike tomorrow to the neighborhood of $2.66.  I’m surprised it didn’t happen earlier this week.

Refiners playing typical Spring games. Ugh.

Finally after the last prediction, Speedway hiked their prices back to 2.59.
I can’t say after reading the DOE report that things look good; they don’t at all.

refiners only utilized around 85% of their capacity, leading to another
fall in gasoline stockpiles. They dropped roughly 2.5 million barrels,
as distillate/diesel stockpiles suffered a bit more, down 2.7 million

I have a new tool I’ll be using to predict refinery
utilization rates for the coming week; be patient with me as I figure
things out and adjust my calculations. I will start giving rough
estimates on where I think utilization will be the following week.

I see prices in GR are down to near 2.40. Wholesale prices are up today
to 1.94. We should see a price hike to 2.65 tomorrow, or Friday at
latest. I will be looking for refineries to inch up their utilization,
capitalizing on refinery glitches that slow production at competing
facilities. Profit from refining is up nearly THIRTY percent in a week.
This will definitely have refiners start to turn up the dials. Look for
around 87% utilization for the next DOE report. The higher utilization,
the more it has potential to push prices down.

Cliff notes: Price hike most likely tomorrow. $2.65 should be the intended target (plus or minus 3 cents)

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