Prices Staying Above $3

Comment on the December 12 prediction:  Prices rose the next day to $3.05, so the prediction was CORRECT.  We also had two more price hikes in December, to $3.09, and then $3.19.  Prices ended the year around $3.09.

Tuesday, January 4, 2011:  I apologize for the long time since my last posting.  I’ve been busy with the holidays, having my car hit by a deer, and some minor surgery to my nose, but I am back to work now, and trying to figure out what is going on with gas prices.  Usually prices are lowest at Christmastime, so this on-going climb since August has been pretty disturbing.  As we’ve noted many times, though, gas prices continue to be locked in with stock prices.  Despite yesterday’s rally in the stock market, the move in oil and gas was more muted.  Based on futures and wholesale prices, retail prices are in a $2.99-$3.19 range, which is exactly what they are right now.  So, I am going to predict a price re-set back to $3.19 by the end of the week.  — Ed Aboufadel

Updated: January 4, 2011 — 9:26 am

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  1. This story is on Yahoo Finance page today. Oil at $88.94 this morning – bet our gas prices don’t go down as fast as they go up. And as usual, sounds to me like they have a BS answer for everything.

    Oil Extends Biggest Drop in Seven Weeks as U.S. Gasoline Demand Slackens

    On Wednesday January 5, 2011, 5:04 am EST Oil extended its biggest drop in seven weeks on signs that snowstorms in the U.S. curbed gasoline consumption in the world’s biggest crude consumer.

    U.S. gasoline demand at the pump plunged 13 percent to the lowest level in five years last week, according to data from MasterCard Inc. The country’s stockpiles of the motor fuel climbed 5.6 million barrels last week, the most in a year, the industry-funded American Petroleum Institute said yesterday. An Energy Department report today will also show a supply gain, according to a Bloomberg News survey.

    “Today and yesterday the market has become more concerned about the fundamental situation in oil,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “The MasterCard report shows gasoline demand falling, while we still have ample inventories.”

    Crude for February delivery slid as much as 99 cents to $88.39 a barrel in electronic trading on the New York Mercantile Exchange. It was at $88.61 at 9:49 a.m. London time. Yesterday, the contract fell 2.4 percent, the biggest drop in seven weeks. Brent crude for February settlement fell as much as 75 cents, or 0.8 percent, to $92.78 a barrel on the London-based ICE Futures Europe exchange.

    Futures fell as the Dollar Index advanced to a one-week high, damping the investment appeal of commodities. Oil traded at $92.58 a barrel on Jan. 3, the highest since October 2008, and has settled above $91 in six of the last eight days.

    Investors are selling futures to profit from those gains, according to Ken Hasegawa, a Tokyo-based commodity derivatives sales manager at Newedge, a brokerage. Yesterday, Brent dropped 1.4 percent, the most since Nov. 30, to $93.53.

    ‘Light Correction’

    “There’s a light correction from profit-taking,” said Hasegawa. “The big increase in gasoline stocks was partly because of heavy snow last week.”

    The Dollar Index, used by IntercontinentalExchange Inc. to track the greenback against the currencies of six U.S. trading partners, climbed for a third day, adding 0.3 percent to 79.64. A rising dollar tends to curb speculative demand for raw materials.

    MasterCard Inc., the second-biggest payments network company, said in its SpendingPulse report that motorists bought an average 8.41 million barrels of gasoline a day in the week ended Dec. 31, down from 9.61 million the previous week.

    U.S. inventories of the motor fuel are expected to have increased 500,000 barrels in the last week of 2010, based on the median estimate of 17 analysts surveyed by Bloomberg News. Supplies were previously at 214.9 million, 3.8 percent above the five-year average, according to the Energy Department.

    Crude Inventories

    U.S. crude inventories probably declined 2 million barrels last week, the Bloomberg News survey showed. Supplies were previously at 339.4 million, 7.2 percent above the five-year average. Yesterday, the American Petroleum Institute posted a 7.5 million-barrel decrease, the most since September 2008.

    “Although we saw a sharp drop in crude oil stocks, the level is still high in comparison with historical data,” said Hasegawa at Newedge. “There’s no concern.”

    Distillate fuel supplies, including heating oil and diesel, rose 750,000 barrels from 161 million, according to the survey. The American Petroleum Institute yesterday said inventories climbed 2.2 million.

  2. Not the happy forecast I was hoping for the new year. As soon as I read your post Ed on Wednesday morning I checked the map and sure enough there was a station at $3.19 already. Thank goodness the rest are slow to catch on!

  3. Speedway is resetting to $3.15 in Ohio right now.

  4. I think you’re off the mark. NPR had a story on 3 January about how gas prices were higher than they should be. There’s no logical justification for any price hikes.

    Nonetheless, gas prices in Lansing jumped from $2.989 this morning to $3.199 this afternoon. Interestingly, it’s fairly common for Lansing prices to rise 20-25 cents on Thursday afternoons. Why is this? One might claim supply and demand, yet Detroit’s near-north suburbs were selling at the same $3.069 price as yesterday. Do Lansingites take weekend trips but Detroiters dont?

    $3.069 near Detroit (unchanged from yestereday). $3.189 in Lansing (up 22 cents from this morning). Why?

  5. Cynical – I don’t know about Lansing, but in Grand Rapids you can have from as little as 10 cents difference from one side of town to another or as much as 20 cents, which makes NO sense to me at all – costs the same to truck it in. I read somewhere that the price of gas is basically 2 or 3 cents per the cost of a barrel of oil. SO, if oil is at $91, then the price of gas should be like $2.73 a gallon. Sure wish I could remember where I read that. It was for Michigan, anyway. Besides, they’ve got an excuse for EVERY reason why they raise the gas prices, the dollar is down, the dollar is up, people are driving more, tis the season [to get screwed], the war, emerging countries that probably aren’t even emerged yet, but they’re predicting, the \analysts\ predict that oil will be . . . . that gas will be. It’s all BS.

  6. This week’s excuse!!! Oil this morning $88 and change.

    The Trans-Alakan Pipeline carrying oil from Prudhoe Bay to the port of Valdez has been shut down due to a leak. The pipeline carries 15% of the oil produced by the U.S., and includes oil produced by BP.

  7. And prices this morning $2.99 in Sparta and $3.19 in Rockford – seriously??? I still don’t get that at all. Other than stations must figure if you can afford to live in Rockford, you can afford higher gas prices.

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