Wednesday, December 31, 2008, 10:45 AM: I don’t have a good sense of what is in store the next week or so. Monday’s price hike was at first blush a bit surprising, but then you look at the numbers and the retail price was about the same as the 0-cent margin price, so that’s why they hiked it.
I want to go back to a posting I made a year ago on GrandRapidsGasPrices.com, to start the "The Gas Game 2008 — Predictions" thread:
"This begins another year of trying to outwit the retailers and buy gas the day before a price hike. If past history holds, prices should climb into mid-January, then sell off for a few weeks, followed by some relentless hikes through the end of March. Next, relatively steady prices until the end of June. July through September … anything can happen, and then gentle drops through the last three months of the year. Some say we’ll hit $4 a gallon in 2008. Others say we’ll get a recession, and prices will fall significantly."
Other than the fact that hikes were relentless from March until June, all of this happened! We got to $4.25, we got a recession, we got prices falling significantly.
I have to say that I found this year pretty stunning. Consequently, for the moment at least, trying to get gas for $1.55 versus $1.65 seems kind of silly after gas was over $4 this summer.
Nevertheless, we will be back again in 2009 to play … The Gas Game!
Tuesday, December 23, 2008, 1:45 PM: Let’s review what has happened since the double-hike of December 11. First, in Standale, Meijer didn’t match the second hike to $1.75, so prices were back to $1.59 the next day. (Hooray for competition!) Since then, they have not changed very much and were $1.55 or so this morning. Everywhere else, prices have dropped, sometimes to the $1.50’s, sometimes still in the upper $1.60’s. I understand from GrandRapidsGasPrices.com that gas is $1.45 in Hudsonville today. Are they itching for a pre-Christmas hike on Wednesday?
Looking at NYMEX, prices are 20 cents a gallon cheaper than two weeks ago, including a big 8-cent drop yesterday. AXXIS seems to be running ahead of NYMEX by a several cents, which is surprising this time of year. Using NYMEX, there would be clearly no price hike this week. Using AXXIS, it is not so clear. So, I would fill up for $1.50 if I can and enjoy the holidays.
Tread carefully today folks! We may see an increase this morning to $1.69 or so. If it doesn’t happen by 11am, we’re off the hook for today, but with recent conditions around the Midwest, it may be possible that we see a hike here in West Michigan this morning.
Fill up if you can find gas under $1.55!
Threatened with sagging oil prices, OPEC held a meeting today to decide if any additional production cuts should be made. This would be their third (?) meeting outside of their normal meetings in the last few months as oil prices have lost all their gains made in the last four years.
While OPEC tried the "shock and awe" approach, the stock market was busy preparing for a response. OPEC went first and decided to cut 2.2million barrels per DAY of oil production, its biggest reduction EVER.
"I hope we surprised you," OPEC President Chekib Khelil said when asked whether the size of the cut would shock moribund oil markets into an upward trend. "If you’re not surprised we need to do something about it."
Crude oil immediately dropped to $40.20 a barrel after the announcement was made in a "in your face" attitude.
I’m convinced the more OPEC tries to prop up prices, the more it will harm their own interests. OPEC is helpless in this market, as we saw today. However, what OPEC is doing is setting themselves up for destruction. They’re obviously hurting for revenue, but this cut will make prices spike eventually when global markets do recover, leading to another potential disaster. OPEC is in a huge bind- they need revenue, but are doing a TERRIBLE job at trying to increase demand for oil (which SHOULD be their largest interest for long term viability).
OPEC is doing things that only benefit in the short term (and look- its not even helping!). The long term outlook for OPEC is failure.
So OPEC, how about announcing another production cut tomorrow so that oil will take another nose dive?
I don’t see a hike this week, but we’re closely monitoring that situation here. If prices become widespread under $1.55, look for a hike.
In the mean time, in your face OPEC!
I’m pleased to announce that TheGasGame has made the jump to Facebook!
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Ed and I will make a rare TEAM interview tomorrow morning (Saturday morning) at 7:40am or so on WKZO (590AM Kalamazoo). Be SURE to tune in!!
For posterity, let me document that at 4PM today in Standale, Citgo was still at $1.44, while Meijer had matched Speedway’s morning price hike and was selling gas for $1.59, while the Marathon had matched Speedway’s afternoon price hike and had gas at $1.75. This evening, checking prices on the Internet, it appears that Meijer is still at $1.59, while BP and some others have also raised their price to $1.75.
So, what happened here? The first price hike made sense because wholesale prices had started rising earlier this week, and if they had raised prices this morning to $1.65-$1.69, it would have even fit my mathematical model. On NYMEX today, prices did soar, and wholesale prices there went up 10 cents a gallon, but usually it takes a least a day for something like that to affect retail prices. I guess by this afternoon, someone had CNBC on and saw the NYMEX price up and sent out the second price hike e-mail of the day.
Is this really the best way to run a business?