Lower, lower, lower.

Comment on my June 30 posting: Prices reset to $2.69 on July 1, except for places where it had never fallen below $2.69.

Monday, July 6, 2009, 6:30PM: Wholesale prices have dropped significantly in the past week. With today’s close, I have the 0-cent margin price at a pretty $2.25. So, unless there is a dramatic reversal on NYMEX the next few days, the prediction is lower prices, with drops of at least 2-4 cents per day.

5 Comments

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  1. independent retailer

    I see that you come up with your 0 margin price by adding the taxes to nymex futures. However there must be a fault. Currently there must be other factors because my delivered cost is nowhere near 2.25

  2. where can i buy this $2.25 at wholesale, i’m all over that. a mistake for sure!! 8cpg mistake.

  3. Look at detroitgasprices.com.
    .08 is real close.

  4. Yes, I am adding taxes in. Over the past several years, what I calculate for the 0-cent margin price has been real close to where the floor for gas prices end up before a price hike. While it may not be what retailers are paying, it does work for predictions, and it suggests that retailers do sell gas below cost some times.

    Using $1.73 on NYMEX:

    (1.73+0.21)*1.06+0.19 = 2.25.

    The 21 cents is the federal tax and miscellaneous fees like transportation. 1.06 takes the sales tax into account. 0.19 is the state gasoline tax.

    More information can be found following the Math/Stats/Data link on this site.

  5. I do something similar for my predictions. I start off with the Chicago spot instead of the NYMEX:

    CS + ((FT + CS)*0.06) + ST + FT + EC + CO + FR

    CS = Chicago Spot
    ST = State Tax or 19c
    FT = Federal Tax or 18.4c
    ((CS + FT)*.06) = Michigan Sales Tax on Chicago Spot and Federal Tax
    EC = Environmental Charge or 1c
    CO = Cost adjustment (profit) or 8c
    FR = Freight cost or 5c

    For today’s $1.6777 Chicago spot, the equation would look like this:

    1.6777+((18.4+$1.6777)*0.06)+19+18.4+1+8+5=$2.299

    Of course I have this in a spreadsheet… I’d hate to have to do that by hand everyday.

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