14 comments Wednesday, 09-17-08 | Posted By Patrick | Commentary
Just to put it out there, local stations are purchasing gasoline today for as low as $3.63.
Some have lost money purchasing fuel at the worst time this past weekend, but we’ll see how fast prices fall and who’s willing to sacrifice their average 49.9cent margin per gallon.
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The Spike Line
some stations that only get one load of gas a week or less are going to be murdered by these falling prices. go ahead push prices down help put the mom and pop shops out of business. SHUT UP B93.
I hardly think B93 mentioning this on the radio is going to cause drastic falling prices…
you ever work at a c-store? the general public is not very nice when they think a gas station is gauging them. SO AGAIN SHUT UP B93!! Most retailers are fair with their prices and when radio/press/news people run off at the mouth, it ticks me off and i’m kind of sick of it. The make retailers look like the bad guy, it’s just not the case!! How often does the media tell you how much a gallon of milk, cloths, water, or any other product cost the retailer? I’ve personally stopped listening to B93 and other radio stations (AM & FM), local news stations – oh yeah and advertising with them!
I can understand how upsetting it may be as I have worked in a gas station but it would be no different that people reading the same info here. The people that complain are going to do it regardless of where they heard the information and those people just complain to complain
Sorry if I offended, that wasn’t my intent.
you didn’t offend me. You do get it though – let Patrick and others predict prices, but it’s not fair to retailers to always be hounding them on the margin they are making. Hello a few cent profit on a fill up of gas is not unfair. A 10% profit – which rarely happens should not be a big news event. The media (electronic included) has an impact on pricing wether you believe it or not. Just look at speedway, after the bad press they had a few months ago, they refused to be the first to restore the price (didn’t want the public/media after them again) even though the price should have went up.
Big Oil & Traders are the criminals, I wish the media would focus their attention on them. but it’s easier to stand out in front of a local gas station (under the price sign or across the street) and question the business practices of the owner. He is to blame, because he is here in Grand Rapids.
Ray, I agree with you to some extent. I think the independent operators are the folks who get the short end of the stick. It’s tough to be a small business person in this economic climate.
However, I don’t agree that it is *only* big oil and traders that are negatively impacting the consumer with their business practices. I definitely think they are, but I also believe they are joined by the large chain business out there such as Speedway, Marathon, Mobil, BP, Shell etc. These business are large enough to have negotiating power, to leverage the futures market appropriately, they have the capital to put their corporation in the best possible profit and margin position and they do so. Then they turn around and push prices upward when the commodities market rises – sometimes beyond what is warranted – and are slow to drop when the commodities market drops. In fact, they sometimes even drop to very low if not zero margins to pressure the independent operators.
My point is, because they are well capitalized, because they play in the futures market, they can hedge against the volatility of the market to some degree and become more predicatable in their profit and margin % forecasts. This is a requirement for these folks since they have responsibilities to shareholders as public companies. The problem with that is they are doing business as an independant would in terms of price setting, but profiting as a large corporation would since they have agreements in place.
ray i would like to know who is making all the money.Feb 28 2008 oil traded at 96.00 .gasoline 3.05 per gallon.that is over a dollar difference in the price of gasoline,yet the same cost for oil.where is that extra dollar per gallon going??dont tell me that in feb they were taking a dollar per gallon loss.nobody is dunb enough to believe that.
Mike, you are apparently considering that oil should always follow the price of gas. This is NOT the case. Quick example:
1) Refineries close nationwide. Oil becomes cheap because no one is using it while gasoline SKYROCKETS because no one is making it. Oil $1, Gasoline $100
2) 500 new refineries open in one year, all refining oil into products (gasoline, diesel). Oil skyrockets because of so much demand from refiners while gasoline falls because there is so much production. Oil $100, Gasoline 1-cent
See the point?
Patrick
I see your point however please explain how the fact that the only refineries that are down are in texas has to do with the prices in Michigan which is supplied by refineries in Ohio,Michigan,Indiana,and Illinios. Someone is taking advantage of the situation in my opinion.
Its not necessarily the refineries in Texas. Its the fact that a LOT of the oil our local refineries use comes in pipelines from LA and TX which were shut. Less oil supply=less gasoline production=higher prices.
Ray: You have to admit that the media coverage and customer comments are much better today than when we first went over $3. People seem to be starting to realize that Exxon’s record profits don’t go into the pocket of the guy running the register. And the media has been doing a better job of pointing out factual info about struggling retailers when they report the record earnings.
Chris: I just posted this in the other thread that you said the same thing before I read this thread. But, you will have a very hard time finding a gas station in the US that is operated by an oil company (other then Marathon operates Speedway). Just about any remaining stations that they do own are either for sale now or will be soon.
Gary: You have to keep in mind that the US consumes 20,680,000 barrels/day of crude oil and our total refining capacity is 17,593,847 barrels/day. Everything East of the Rockies is very closely tied to each other. Any area that has a problem will need to be covered by refineries in another area. Any refinery that had product to spare was sending it down South to help cover the shortages instead of up here to keep our prices low (like they should).
Also, at least 90% of the gas in Michigan comes in by pipeline. You might be surprised how much of it is normally refined in Texas or Louisiana.
How is it that gas is $3.57 in the Flint area and $3.95 in GR area??
I have a little bit to cintribute…along with a hundred questions…
Lets start with Why is gas more expensive here vs. the Flint area?
My guess…we come off the port of Ferrysburg. I assume they recieve via boat from the Chicago area. Flint recieves off the pipeline from Toledo..NO BOAT! Just a guess though. The Lakehead pipeline and others has a terminal in Owosso on M21. Lower shipping costs means lower fuel prices.
Question..How much of our refined product comes from Chicago/Whiting or Wood River Ill or Findlay Ohio or Toledo Ohio refineries. Down River Detroit has a Marathon refinery too. How much comes up via pipe from the southern states? Even with a pipeline that adds to shipping costs. Knowing that would add to the equation of How Much Does The Fuel We Use Actually Cost The Retailer…and who is ripping of whom.
In the long run does it matter? Naaa we gotta pay the piper if we wanna drive the car don’t we. Buy stock in the companies then. Make some dividend money…to buy fuel with!
Enjoy the site so far!
Dan in Rockford
Daniel G: I can answer a few of your questions.
First of all, everyone always assumes that when there is a big price difference between towns, that the low price is where everyone should be and the high price towns are doing something wrong. But, almost every time you see that kind of difference is because someone in the cheaper town has dropped prices farther/faster than they should’ve. Contrary to popular belief, retail gasoline is a highly competitive business. If someone drops their price, everyone else will follow them. The dumbest guy in town controls the profits for everyone else. Today (Monday) the one Speedway in Flint is at $3.579 which is below my cost. Plus, Credit Card fees will steal an extra 10 cents per gallon from you. Their prices should really be in the $3.759 – $3.799 range.
Ferrysburg gets product from the pipeline that runs up to Muskegon. I assume that people in Flint either get product from Lansing or Bay City (both on a pipeline). I think that Traverse City and Cheboygan are the only terminals supplied by boat and from what I hear, their prices are quite a bit higher. Plus, the Lake has been so low the last few years that they haven’t been able to fill the boats all the way, to prevent hitting the bottom.
Here’s a couple maps of the 2 main pipeline companies for Michigan (the buckeye map isn’t very useful though).
http://www.wolverinepipeline.com/aboutUs/SystemMap.aspx
http://www.buckeye.com/AboutUs/SystemMap/tabid/57/Default.aspx
It’s my understanding that the Detroit refinery makes just enough gas to supply Detroit and the rest of the State never sees any of it. So, the rest of us get gas that was refined in Il, In, Oh, Ky, La, or Tx. There is very little crude oil in the Midwest, so probably over 75% of the crude for Midwest refineries comes up from the Gulf coast. And, believe it or not a very high percentage of the crude comes up the Mississippi River by barge. If I remember right, it takes 21 days for crude to go from the Gulf to Chicago by pipeline, and 7-10 by barge.
On average, retail margins have been 10-15 cents (with the huge wholesale price swings, this is not an average month). With increases in utility exspenses, wages, insurance, freight, credit card fees, etc those margins should really be in the 20-25 cent range. But, not every station owner has figured that out yet. I don’t think it is unreasonable for 5% of the price of gas to go to the retailer.