Month: February 2011

Another hike coming up? Or not? Who’s getting rich?

Saturday, February 26, 5:45PM:  Wholesale gas prices shot up 25 cents the past week, leading to two price hikes and a current retail price of $3.45.  I can’t predict what is going to happen this coming week.  The other day, rumors that Libya’s Gadhafi was dead caused market prices to temporarily drop, which is just an example of how crazy it is.  I think the 0-cent margin price is about $3.35 today, so given past practice, prices could have risen to $3.55 on Friday.  Maybe they are trying to spread out the pain over several days.

So, who’s making money off this spike in prices?  Anyone who possesses oil or gasoline.  Station owners who have gas in their underground tanks that they bought for cheaper prices last month are making some extra money by following the Big Red price leader, but those owners are left holding the bag if wholesale and retail prices fall after they pay $3.35 a gallon on Monday to fill their storage tanks.  The government takes its taxes, which are based on how many gallons are sold and how the price per gallon, so a bit more is being collected due to the price spike.  Gasoline refiners are probably earning more, but the big winners must be the oil producers, as half the price of a gallon of gas goes back to them.  Sometimes that is the oil companies, sometimes it is landowners in places like Saudi Arabia, Russia, Alaska, Texas, even North Dakota. If things get worse, perhaps the Strategic Petroleum Reserve will help. — Ed A.

The trend is your friend (if you are long gas and oil)

Comment on the February 13 posting:  Prices hiked on Tuesday the 15th, and again yesterday.  CORRECT, sadly.

Wednesday, February 23, 2011, 12:30PM:  When I see headlines in USA Today predicting $5 gas, and screaming on the Internet that the price of oil is about to double, I want to say, “Let’s take a deep breath.”  Yes, short term, the energy markets are following the mantra, “The trend is your friend until it ends.”  The trend has been up since last May, actually, and the idea of this mantra is that when a market is trending up, it will most likely take the news as an excuse to keep trending up.  Sadly, that means people are getting rich right now, and we are paying more money for gas.  Based on the UGA quote, wholesale gas prices are up again today, and in  volatile markets like what we have now, it is hard to make any predictions.  So, I won’t. — Ed Aboufadel

Gasoline inventories are up, up, up, and yet …

Comment on Tuesday’s prediction:  Stock prices drifted lower through Thursday and we did not get a price hike, so I guess the prediction was CORRECT.  Stocks hit new highs for the year on Friday, though.

Sunday, February 13, 2011, 7:45PM:  I know I am not going to have any time for postings the next two weeks, but I have time this evening to comment on a few matters.  First, although stocks hit new highs on Friday, wholesale prices dropped a bit after Mubarak resigned in Egypt.  So, at the moment, the 0-cent margin price is around $3.08.  With retail prices as low as $3.06 in Lowell, we are setting up for a price hike this week, but I can’t predict when or how much.

In related matters, here is another example of how the supply/demand dynamic has broken down, gasoline inventories are at 20-year highs, yet prices are clearly not dropping.   — Ed Aboufadel

Gas prices still better than September 2008 … for now

Tuesday, February 8, 2011, 10:30AM:  Prices rose again on Thursday, this time to $3.25.  The last time prices were this high were October 2008.  This was after prices topped out at $4.19 in mid-September that year, before dropping to $1.45 by December 2008.  Oh, yeah, the stock market had a nasty bear market that fall, too.

So, here we are in February 2011.  Stocks has recovered much of their losses, and gas prices are up again.  Amazing how tightly these things, and gold, and other favorites of traders have moved up together.  I’m not good a long-term predictions, but let’s see if we can figure out what is going to happen this week.  On Friday, wholesale prices dropped a bit, and today they are up somewhat, so that keeps us in the $3.05-$3.25 range for now.  Low price in town is $3.12.  If you hear about new highs in the stock market today or tomorrow, expect a price hike on Thursday.  Otherwise, we’ll keep drifting down towards $3.05, and make it through the weekend without a hike. — Ed Aboufadel

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