# 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.

Updated: July 6, 2009 — 6:31 pm

1. 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.

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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