Gas at $3.65 now, but is $3.75 possible?
Tuesday 22 May 2007 | Posted By Patrick | Predictions
My benchmark station in Indiana that is provided gasoline by the same
refiner we are jumped from 3.38 to 3.58 today. We jumped from around
3.38 to 3.65. As I’ve told you before, this station is usually much
cheaper than Grand Rapids is.
Are we in store for a hike yet again to $3.75? I’m not sure. Wholesale
prices went way down today, and prices for gasoline supplied via
pipeline plunged (Grand Rapids is serviced by the Wolverine Pipeline
from down south which also ships gasoline via Muskegon and
Holland, our major racks.) The pipeline prices fell 13-15 cents today.
This makes calling another hike very difficult.
I was looking at CaliforniaGasPrices.com and noticed that Grand Rapids
is just cents away from the HIGHEST prices in California, and any hike
will likely take us to the top.
Also, according to GasBuddy.com, Michigan has the highest average in
the 50 states- $3.535. Indiana and Illinois follow, but are “only” at
$3.47 and $3.45, respectively.
When will it end?
Not just yet, but I still don’t see $4 gas being a reality here.
Are these prices gouging?
No, wholesale prices have climbed.
Why are prices so high?
As I’ve said before its because Michigan’s gasoline demand is so high
yet and we have but one refinery serving us. A major refinery that
serves Grand Rapids is only operating at 50%. States like Indiana have
lower demand (lower population) and have more refineries.
So, a hike is POSSIBLE, but odds are only 60/40 for $3.75.
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We had an average of 14 cents down from the racks we use. It seems posible to me that we finally hit the peak (hopefully the inventory report will show an increase).
Based on today’s price, margins are extremely high. But, unfortunatly most stations don’t have gas with today’s price in the ground. So, it should take a few days before most stations are excited to drop (we’ve all taken a beating on our margins this month).
I would expect most stations to be in the mid $3.40s this weekend, and I’m sure there will be places in the mid $3.30s.
Also, the fact that we only have 1 refinery in the State isn’t really a big deal, there are a lot of States that don’t have any refineries at all. And actually, our 1 refinery only makes enough gas to supply Detroit and Toledo, so it really doesn’t benifit the rest of us. You would be surprised how much of the gas we have in Michigan is refined in the Gulf Coast. Over a billion gallons per month are shipped from the Gulf to the Midwest
Here’s a map of the country’s refinery and pipeline system. It’s a bit old and some things have changed (like the old refinery in Alma), but it is still interesting. It certainlly shows why a hurricane in the Gulf affects prices all over.
http://www.nacsonline.com/NR/rdonlyres/ep2ywt54quqyh3tv6iuuzq2omeds7xpallxilrkukrlveaus5nrhbqfqwie7t4vgn6c3v7ivr2k67ccnwdgocqkg4of/USGasDistribution.pdf
Thank you for that! I was spending quite a bit of time yesterday looking for a nice big map like that!