Falling Below $4 Again

Tuesday, June 7, 2011, 1:45PM:  Time to predict how the next several days is going to play out.  As GasBuddy noted yesterday, wholesale prices have dropped considerably the last few days.  This may be due to getting those refinery problems fixed, and it also is reflected in the weakness in stocks since the end of May.  Gas in Lowell has been $3.86 since Sunday, and the prediction is that we will see prices falling through at least Monday, perhaps as low as $3.79 somewhere in the area. — Ed Aboufadel

Updated: June 7, 2011 — 12:39 pm

12 Comments

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  1. I think we have the ability to fall even farther, even down to the $3.50s with current prices. The Spike line is at $3.52 right now (in Michigan, even lower in Indiana ($3.41) and Ohio ($3.28)), with another 4-6 cent drop today, and possible lower prices in the future, who knows where we will fall.

  2. ChrisDG74, Cincinnati, OH

    Paid $3.599 in Ohio Sunday.

  3. Diether Haenicke

    The specific price predictions on this website refer to west Michigan (particularly Grand Rapids and Kalamazoo). The general price movements are most applicable to the lower peninsula of Michigan, Indiana, Ohio, Illinois, extreme southeast Wisconsin, and sometimes Kentucky.

    Ohio prices have an advantage over Michigan and Indiana, because while Ohio has a higher per gallon state fuel tax, Ohio does not have an additional percentage based state sales tax in its gas prices. At the moment, this alone makes Ohio prices 10¢ lower. The bigger question is where in Ohio did you get gas for $3.599 on Sunday? The lowest price for Cincinnati currently reported on GasBuddy is $3.629 in Fairfield and the metro’s average is $3.836.

    The last time we had a big wholesale drop, prices dropped an average of 30¢ in a week in Kalamazoo, from $4.099 on Sunday, May 15 to $3.799 on Sunday, May 22. In that same time period, prices in Grand Rapids dropped only 20¢.

    This Sunday (June 5), median prices in Kalamazoo were again $4.099, so I wouldn’t be surprised to see Kalamazoo experience an identical 30¢ drop by Sunday.

    The Kalamazoo GasBuddy average yesterday was $4.043. It is currently $4.000. In Grand Rapids, it’s currently $4.068.

    In Kalamazoo, there are currently 24 stations reported at or below $3.979. In Grand Rapids, every station is at $3.989 or above, except for $3.869 and $3.879 at 6 stations in Lowell.

    So, just like last time there was a big wholesale drop, Kalamazoo is significantly ahead of Grand Rapids in lowering prices.

    As far as the Chicago spot market price, it stayed basically the same today, -0.620% to $2.88690 as of 4:05 p.m. ET.

    In general, there are usually lower (for the spring/summer) prices this time of year until late July/early August when the greatest number of people go on vacation (or at least traders expect them to, so prices go up anyway) and there start to be worries about every tropical depression in the Atlantic turning into the next Hurricane Katrina. Then we have the big fall drop for the month following Labor Day, except that didn’t happen last fall or winter. The lowest prices of the year are typically achieved by Thanksgiving and stay in that range until the spring rise begins by Valentine’s Day. Winter prices could be a little lower than they are (and summer prices a little higher), except overall oil prices are higher during the winter, I guess because oil is used for heating.

  4. ChrisDG74, Cincinnati, OH

    Diether – The Dixie Deli Food Mart on Route 4 in Fairfield, just north of I-275. Sunday afternnoon, they were $3.599. Some of the other stations (Sunoco, Mobil) had run out of regular unleaded, at $3.669. They had red bags on their pumps.
    I haven’t been up Rt 4 since Sunday. I have no idea what their current price is.

  5. I found a way to get cheaper gas – get out of a Speedway state! I live in Holland, MI and watch Speedway (I call them GREEDway) raise the prices up, up, up. The Midwest has taken a beating on gas prices this year. I am in Bloomington, MN – have been watching gas prices here for about a month before this trip. The Shell on the corner by my hotel has been $3.79 for at least two-three weeks. I chuckled that the station has an electronic price sign, I know they need those in MI since the price can change multiple times in one day… Figured it was a step to prevent Carpal Tunnel in gas station employees. I am really sick of Speedway and their annoying pricing policies.

  6. @DutchBrad….Good to see another MN player, I’m south of the river and the predictions on this site along with watching what the speedway stations that are franchises are pretty good indicators of what to watch for as far as spikes go.

  7. Is Minnesota a state that has a law that prohibits gas stations from selling fuel below cost? It might be Wisconsin that has that law. We certainly don’t have a law like that in Michigan.

    It used to be only the Speedways/Super Americas in Minnesota and possibly ND/SD were franchised and all others were corporate owned. It used to be possible to see exactly what stations were franchises on Speedway’s website, but I go there now and it says there are no Speedways in Minnesota. GasBuddy also has no Speedways for Minnesota, but it does have 97 SuperAmericas. I guess Speedway is no longer associated with SuperAmerica branded stations, as I see the SuperAmerica logo is now missing from their homepage. I guess this is consistent with Speedway finally having only one brand. In addition to SuperAmerica, they also used to have Rich, Total, and United brands, and probably others, back about 20 years ago when those were the “cheapie” stations. I think the mailbox of the Speedway in Texas Township, Michigan still says Total on it.

    The afternoon (12:44) update puts the current Chicago spot price at $2.959.

    Kalamazoo ($3.888 metro average) continues to lead Grand Rapids ($3.963) in lowering prices by 7.5¢. The lowest reported prices in Grand Rapids are still $3.869-$3.879 at 6 stations in Lowell plus $3.859 at the usual low price leader of Circle K at 44th and Eastern in Kentwood. In Kalamazoo, there are 37 stations reported between $3.879 and $3.799. However, I believe the one station at $3.799 is the cash only price, so if you don’t use cash, Kalamazoo hasn’t fallen to my predicted (by Sunday, June 12) $3.799 yet.

    GasBuddy asks users to report the higher credit price and note in the comments a lower cash price when there is one. What do you think of this? Apparently, only around 25% of customers pay for fuel in cash, so for most people reporting the higher credit price makes sense. I think there should be the ability to report separate cash and credit prices, by default display the credit price, but have the ability to list and rank by cash prices for visitors that choose that option. I should probably suggest this to Patrick, one of the founders of TheGasGame who is still apparently somewhere in the Grand Rapids area, so that’s why his predictions, like this site, are biased towards the West Michigan area.

    Really, the primary reason this site exists is because of Speedway and it’s dominance of the market and its corporate parent Marathon owning the only refinery in Michigan. If Speedway didn’t dominate the market, 15-25¢ retail price increases would not be a regular, weekly occurrence (when the wholesale price is flat or rising) and there wouldn’t be a lot of specifics to predict in a diverse market. It’s kind of crazy, but the second largest gasoline retailer around here seems to be a grocery store, Meijer. At least Meijer built entirely new locations, while Speedway bought up a lot of existing stations, like Mobil and Crystal Flash, though most have been largely or entirely remodeled.

  8. Credit prices in Kalamazoo are starting to hit my predicted $3.799 target today. I observed a cash/credit price of $3.799 this afternoon at the Marathon in downtown Kalamazoo.

    On the west side of town, which typically has higher prices, $3.859 was the cash/credit price at every location I saw this morning, except for the Marathon (former Quick Stop) on Stadium Dr. which was $3.849. At the Roadhawk on Stadium Dr. which I mentioned yesterday as being $3.799 for cash, they were still that cash price today and $3.869 for credit.

    The current GasBuddy average for Kalamazoo is $3.871 and $3.944 in Grand Rapids, giving Kalamazoo prices on average that are 7.3¢ lower.

    Can we get another full week of falling prices? That doesn’t happen very often outside of September. Saudi Arabia deciding to boost oil production despite OPEC certainly helps. We’ll have to see how markets respond on Monday.

  9. I heard this morning that due to Saudia Arabia boosting production, oil prices are falling – that being said, as you said, can we expect to see another week of falling prices?? I wouldn’t bet the farm, I’m guessing they’ll jump them.

  10. E85 FUEL:

    The U.S. Senate is to vote today on repealing $5 billion a year in ethanol subsidies.

    http://www.wwmt.com/articles/senate-1392089-credits-ethanol.html

    I am absolutely in favor of this, as well as eliminating all other subsidies, price supports, and every other local, state, and federal intervention in the economy. The market (i.e. you and me) should decide what fuels to produce. The government should not pick winners and losers.

    Further, this whole industry of corn and ethanol subsidies has an effect on the entire policital process, as Iowa has traditionally gone second in the Presidental primary process and candidates pander to Iowans on corn and ethanol subsidies to get their votes.

    I guess the only positive about ethanol is it is a domestic fuel source, not funding countries that want to kill us. However, we get most of our imported oil from Canada and Mexico, so I don’t know how much national security benefit we get out of ethanol. Probably little to none.

    It is my understanding most of the regular unleaded gasoline we buy today is in fact E10, that is 90% gasoline and 10% ethanol. It seems I’ve seen some pumps marked E10 in the past, but I haven’t seen those recently. Is it true that most of the “gasoline” we buy today in West Michigan is in fact E-10? I’ve read there is an effort to bump us up to E-15, but current pumps are not certified for that fuel. A few years ago, the former Frontier (now Sunoco) gas station on E. Kilgore Rd. in Pavilion Township was advertising that they sold 100% gasoline.

    The average price for gasoline in Kalamazoo has fallen to $3.799 with the lowest price of $3.749 reported at 8 stations. In Grand Rapids, the average has fallen to $3.844 and there are 14 stations reported between $3.699 and $3.739, with the lowest prices being in the vacinity of 44th St. and Eastern Ave. in Kentwood. The Grand Rapids average fell 4.9¢ in the past 24 hours and 21.7¢ in the past week.

    AAA reports the following averages:

    USA $3.696 and $4.218 for E85 (BTU adjusted price)

    $3.739 Lansing
    $3.847 Benton Harbor
    $3.877 Grand Rapids-Muskegon-Holland

    New York WTI crude oil for July delivery is currently $97.55 per barrel. I wonder how the market will respond if the U.S. Senate votes to repeal ethanol subsidies. I imagine the market doesn’t care, but if it does care, oil would go up a little because it could mean less ethanol production in the future.

  11. I’m not certain it will happen, but I would be alert for an increase in Michigan this Thursday, June 16 to $3.859.

    Here are today’s closing prices:

    $2.9746 up 1.633% – Chicago gasoline for immediate delivery (4:44 PM ET)

    $3.0646 up 6.78¢ – New York gasoline for July delivery

    $99.37 up $2.07 – New York WTI crude oil for July delivery

    These increases were despite the U.S. dollar being stronger against the €, ¥, Australian and Canadian $ (+0.0968%), Swiss Franc, and only 0.0143% weaker against the £.

    However, all major commodities were higher today, except for natural gas, Canadian rapeseed (canola), and sugar.

    Current retail averages:

    $3.883 Ann Arbor – 5 stations $3.659-$3.699 in Ypsilanti and Milan
    $3.834 Grand Rapids – $3.689 lowest at 4 locations near 44th and Eastern
    $3.833 Michigan – Lansing claims 9 of the 15 lowest prices in the state
    $3.802 Detroit – 3 stations in the city $3.579-$3.589
    $3.801 Kalamazoo – $3.699 lowest at 2 locations downtown
    $3.768 Flint – 11 stations $3.699, 1 $3.689, 1 $3.669, most in Fenton
    $3.714 Lansing – 87 stations between $3.589 (Sam’s Club) and $3.699
    $3.701 USA – Hawaii and Alaska are the only states with averages above $4

    The BP at I-94 exit 198 in Romulus again takes the highest price in the state with $4.299 reported at 5:38 p.m. today. While most gasoline retailers make little to no money on gasoline (especially after credit card fees), that one in Romulus right next to the Detroit Metro. Airport certainly does. The closest gas station to that one is a Speedway and they are only charging $3.779, 52¢ less.

    Here is a “60 Minutes” story from two Sundays ago about high-frequency stock trading done by computer programs. These firms try to make a fraction of a cent off tens of millions of automated trades a day. The story concludes by saying these traders plan to move into commodities soon:

    http://www.cbsnews.com/video/watch/?id=7368460n

  12. Interestingly, on my way through, Rockford gas prices were $3.99 yesterday, last night, again, on my way through [and cuz I never buy it there], Rockford was $3.89 – which normally means they would be hiking prices today – I guess we’ll know more about that around noon or early afternoon today.

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