One week later, $3.69 is here!
Tuesday 22 Apr 2008 | Posted By Patrick | Commentary
Well, I hope you all had your tanks full this morning, there was a 7-day advance notice of this latest hike! I’m actually surprised that it took so long, but there are several reasons they may have waited- including getting rid of remaining winter fuel, etc.
$3.69 is here and don’t look for it to fall too fast either!
Stay tuned here to TheGasGame.com for any news on more price hikes! Be sure to tell a coworker or friends about us too!
Patrick
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I was trying to decide yesterday if Marathon would play games with Speedway’s retail prices if they were going to be in trouble with their winter gas inventory. It certainly seems like a possibility, but I don’t think they would unless it was an extreme situation. The oil companies do play games for sure with the wholesale prices this time of year depending on when they are getting a delivery at different terminals.
For anyone that doesn’t know, gas stations are required to switch to a different blend of gasoline that evaporates slower in the summer. This cures the “vapor lock” problem that cars used to have on hot days. The oil companies used to be able to switch over to summer gas whenever it was convenient for them, but sometimes they would wait too long (because it’s more expensive to make). So, the EPA decided that the oil companies have to be completely switched by May 1st, and retailers by June 1st.
The problem with forcing the oil companies to switch on a set day is that it is extremely complicated to time everything. They need to get each storage tank (we’re talking thousands of tanks that hold 100,000+ gallons for each company) almost empty before they put the summer gas in it.
Most terminals get deliveries from a pipeline that they share with other companies, so they have to schedule their shipment ahead of time. If the tank that the new product is going into isn’t low enough by time the shipment gets there, then the new blend won’t have the proper RVP (Reid Vapor Pressure) and they will have to try again. I have no idea what they can do with a tank that has the wrong RVP after May 1st. They can also have the opposite problem if they plan things wrong and the tank can run completely out before the new shipment comes in. This does happen from time to time, but normally just for a couple hours and luckily lower Michigan has a lot of terminals to choose from.
The dumbest part of this forced May 1st switchover is its affect on the future’s market, which affects the wholesale prices, which affects the retail prices. The stupid people that trade on the future’s market freak out whenever the weekly EIA report shows an “unexpected drop in inventories.” Of course it isn’t really unexpected that when the oil companies are running their tanks down low, that the result would be lower inventories. But, it never fails that the market spikes in April - May, which ultimately results in higher retail prices.
And somehow the retailers get blamed…