Month: October 2009

Consequence of Economic Action: Higher Gas Prices

Comment on the October 9 posting: It is good thing that wasn’t a prediction, as prices rose twice since then to $2.59, and then $2.75.

Sunday, October 25, 2009, 8:30PM: Readers of this blog know that I have been making the case the past few years of correlations between the stock market and the price of gas. Adding to this argument is that the Dow has gone from 6500 in March to 10000 this month, while a gallon of gas has climbed from $2.08 in March to $2.75 this weekend. (A barrel of oil has gone from $50 to $80 since March.) From what I’ve read, government and quasi-government offices such as the Treasury and the Federal Reserve have been pumping dollars into our economy since March to prevent this Great Recession from turning into a New Depression. The dollars are supposed to credit going again, for small businesses, large businesses, and consumers, but that isn’t happening very much. Instead, the dollars are finding their way to the stock, bond, and commodity markets, leading to a rousing rally in stocks, and higher gas prices. So, the economy continues to struggle, unemployment is high, but gas prices are rising despite sluggish demand. To put it mildly, this is not good at all.

The best we can do is figure out what is going to happen to gas prices this week, and maybe save you a few dollars. Although we hiked to $2.75 on Tuesday, wholesale prices continued to rise the rest of the week, and I estimate the 0-cent margin price to be about $2.59 or so, and the 20-cent margin price is $2.84. So, we have the potential for another 10-cent hike on Monday or Tuesday, but it is hard to be certain right now. So, keep your eyes on the price signs or the Internet, and be prepared if a station raises prices soon, so you can find one that hasn’t yet. In Standale, the Marathon is usually the last the raise its price. — Ed Aboufadel.

A weak dollar puts us in another pickle

Chicago Spot: $2.11 UP 0.0616
Fair price adjustment: 0.7948
Fair Price: 2.7662
Average selling price 2.7150
Margin over cost + profit: -0.0512

We are in dangerous territory. The commodities market is up yet again, this time on a weak dollar. Fair price is at break even, which can mean a spike is close at hand. But, we have already had a spike this week, so another one is not as likely to come. But we just came off a weekend where the margin was thin, and Speedway might not want to repeat that again. But the last time commodities spiked up like this (in May) Speedway lagged behind so much that Indiana gas stations lost money on the sale of fuel. But… well, you get the idea.

It would be prudent to watch the prices as they may climb going into the weekend. Indiana could see $2.75-2.80, Michigan and NW Indiana could be 5-10 cents higher. Or, we could see prices stagnate or drop very slowly… only the people in Ohio know what will happen.

Gas, Oil on the up and up (and up, and up…)

Chicago Spot: $2.03 UP 0.0079
Fair price adjustment: 0.7914
Michigan Fair Price: 2.6792
Michigan Average selling price 2.5970
Margin over cost + profit: -0.0822

The dam has gotta break sometime. Gas usually falls at least 2 cents on non-spike days, but over the weekend it didn’t budge, or only went down a couple cents, depending on where you live. The average in Michigan is only .3¢ cheaper than the Thursday spike price. Stagnation like that shows stations are feeling the pinch. The fair price is 8 cents above the current average, too.

Expect a spike tomorrow. Most of Indiana will see 2.65-2.70, while Michigan will be 4-6 cents higher, and NW Indiana will be 5-10 cents higher.

Surge in National markets makes spike loom near

I meant to post this last night, but I got called away for diaper duty, and then bedtime. My apologies.

There was no DOE report yesterday because of the Columbus Day holiday. So will Speedway treat today as a Thursday or a Wednesday? If it is a Wednesday, they may wait for the DOE report before acting with a spike. If it’s a Thursday they may spike at 9am as they normally do. Indiana could go to $2.50-2.55, Michigan and NW Indiana about 5 cents higher.

CORRECT? WRONG?

Friday, October 9, 2009, 12:30PM: When I first started posting predictions on The Gas Game several years ago, I would label the predictions as CORRECT or WRONG. It was a way for me to figure it if what I was doing had any validity. Also, in order to have a reasonable assessment of my approach, I had to be careful about what was a prediction and what wasn’t. As we moved to this blog format a few years ago, I’ve been very careful to label my postings as either a Prediction or a Commentary for that reason. It is also why sometimes I don’t post anything, because sometimes I have no idea. Sometimes, I’m really busy, too. All in all, I am CORRECT 70% of the time.

I write this for people who wonder why I always come back to CORRECT or WRONG. I am just trying to be accountable. If you can do better than 70%, then you are the Gas Game Champion, right? Long-time readers will recall that a few years ago, I was on a WRONG streak, but I kept labeling my predictions accurately.

This is all a preface to talk about this week. My post on Wednesday was a Commentary, and thank goodness, because if it was a Prediction, it would have been WRONG, as prices rose mysteriously late Thursday to $2.55 a gallon. There was a bit of a jump in NYMEX gas and oil yesterday, but not the type that would lead to a second hike in a week. My experience is that weird hikes like this, perhaps due to someone in the Big Red home office hitting the panic button, tend to mark short-term tops in gas prices, so my gut instinct is not only that we go lower the next few days, but that $2.55 may be the high price for the rest of the year. That’s not an official prediction, though!

Competition Dries Up on Lake Michigan Drive

Comment on the September 23 prediction: It was CORRECT, as prices did drop below $2.30. I filled up for $2.29 on Sunday on Beltline.

Wednesday, October 7, 2009, 1:30PM: The price re-set to $2.45 on Monday was interesting. On Lake Michigan Drive, prices had been stuck at $2.44, so there wasn’t any hike at all. Prices were stuck because the Citgo has gone out of business again, and they were the ones that pulled prices down. So, unless someone else in Standale starts pricing aggressively, I am going to be avoiding buying gas along my main commute. There was a jump in wholesale prices yesterday, but there is no follow-through today, and I think the 0-cent margin price is about $2.33. That means if we get close to $2.33 this week, then there could be another hike. Other than Sam’s Club or Costco, there’s no sign of it.

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