Comment on the September 29 prediction: We hiked to $2.75 the next day, so the prediction was CORRECT. Then we had two more hikes last week to $2.85 and $2.95 that I didn’t help out with any prediction. Sorry.

Friday, October 15, 2010, 10:15AM: So much for my observation two weeks ago that “prices ought to drop as we get closer to Christmas”. Instead, we are close to going over $3 a gallon. Why is this? As readers of this blog know, energy prices have moved the last several years in the same way the stock market has. The following graph, comparing the S&P 500 to the gasoline ETF with symbol UGA shows you how this has worked during 2010:

So, if you want to be angry about rising gas prices later, consider why the stock market has been rallying since the end of August. Here are theories floating around in the media: (1) The Federal Reserve is pumping money into the system, which usually ends up in the stock market; (2) investors are excited at the prospect that the Republicans are taking over Congress and expect more business-friendly laws to be passed in 2011; (3) the economy is actually improving and is better than everyone “feels” it is, particularly the 10% or more who are unemployed. Then, you also have to ask why there has been such a connection between stocks all commodities, because that isn’t how it always works. Some blame the way Wall Street has changed the past several years, moving more to trading based on computer calculations, which are based on assumptions like, “either everything goes up, or it goes down.”

The best we can do locally is try to figure out when to buy gas. Using AXXIS prices, the 0-cent margin price is about $2.79 right now. With retail prices averaging around $2.89 in Grand Rapids right now, we could get a hike early next week to $2.99. Depends on the stock market today and Monday, so I’m not going to call this a prediction quite yet. — Ed Aboufadel