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  1. So what exactly does an unwarranted spike mean – – that their gouging prices because they can??

  2. ChrisDG74, Cincinnati, OH

    Get ready for more high prices. Helicopter Ben announced that QE-3 is ready “when needed”.

  3. Unwarranted means it fell outside the normal bounds of when we have come to expect price resets to occur. The spike line yesterday had a six cent margin in Michigan. The spike line is the difference between the estimated retailer cost (based on that day’s Chicago spot market price) and the average retail price of all the Speedways in the state. We expect Speedway to reset their prices to a profitable level when the average price among all their stations falls to about cost, that is when the spike line falls to zero. Based on yesterday’s spike line, I would not have expected the next reset to have occurred until at least Thursday (tomorrow). If there was a big upward move in the oil and gasoline markets, that would also be a reason to expect an increase. There have been no big movements in oil and gasoline this week. Here are the New York gasoline August futures settlement prices for the past 5 days: $2.9976, $3.1270, $3.0926, $3.0705, $3.0982 (yesterday).

    The only thing to say about this increase is it occurred exactly one week after the previous one. The increase wasn’t completely out of bounds. Based on yesterday’s spike line price, $3.859 is exactly the price I would have expected for a full profit margin reset. So, it’s not the price that is the issue, it’s that the timing was unexpected. I guess resetting on Tuesday is better than Thursday for people who have weekend travel plans.

    I wrote before about Admiral stations being the low price leaders and possibly the third largest gasoline retailer in Michigan (in terms of number of locations). Among the 8 lowest gas prices in Michigan, 4 of them are currently at Admiral stations. In Kalamazoo/Portage, we have only 1 Admiral station. As of 9:00 this morning, it has not followed Speedway and remains at the same $3.679 price it was yesterday morning. If that Admiral remains at that price, the nearby Meijer and 4 Speedway/Rich stations will probably drop their prices to match it by this afternoon. At 9:01 this morning, that Meijer was $3.859. Speedway’s website shows those 4 Speedway/Rich stations have dropped 18¢ this morning from $3.859 to $3.679. So, that 1 Admiral station alone can keep the prices significantly lower at 6 stations.

    Here is an editorial published this morning by The Muskegon Chronicle:

    http://www.mlive.com/opinion/muskegon/index.ssf/2011/07/editorial_getting_hosed_gas_pr.html

    The most interesting parts of the editorial are:

    “Muskegon’s high gas prices are especially frustrating because a depot on M-120 in North Muskegon fuels many of the tanker trucks delivering to local stations. Transportation costs don’t seem to be a real factor in the cost of fuel.”

    “Oil companies often practice “zone pricing,” or charging various retailers different prices for gasoline, he wrote. The pricing depends on what geographical zone a retailer is in, how many other retailers the company has in the same zone, and other factors, Tague wrote. The practice forces some retailers to charge more than others.”

    I guess Bill and Ed can tell us what they know about zone pricing.

  4. Zone pricing has it’s reasons. Some areas have higher volume, and use more fuel. They can charge less to deliver to an area like this. Other zones don’t have as much traffic or are farther away from the terminal, and get less gas. They can have higher prices.

    I don’t think Zone Pricing has much to do with what happened yesterday, however. My numbers just don’t add up to a spike. And it doesn’t look like Speedway lead the way, either. We usually see a uniform jump with all stations when it does. That just didn’t happen. Could be that Meijer or Family Express (or both) started, and other stations in the area followed. Or Speedway has broken pattern. Only they know.

  5. I think the un-uniformity you are seeing is because it wasn’t a completely necessary reset.

    9:49 a.m. Tuesday, July 12 – The earliest report (I could find) of a Speedway in Michigan at the new price yesterday. This is in the 10 a.m. vicinity when Speedway almost always goes up, here in Kalamazoo and most of west Michigan.

    11:59 a.m. Tuesday, July 12 – @duaneroznowski on Twitter tweeted a Meijer gas alert text message he received (note that this is different than someone retweeting a Meijer tweet or Facebook gas alert, which they did not do) http://twitter.com/#!/duaneroznowski/status/90812444968103937

    12:12 p.m. Tuesday, July 12 – Absolutely the earliest report of a Meijer in Michigan (Rochester Hills) at the new price yesterday.

    Meijer has not tweeted or posted to Facebook a gas price alert since Thursday, June 30. That means it has not sent an alert by those outlets for the past two resets (Tuesday, July 5 and Tuesday, July 12). However, it appears they sent a SMS text alert for both of those increases.

    As seen from Kalamazoo, it is absolutely clear that Speedway went first on Tuesday, July 12 (as well as every other occasion except for that rare Sunday increase earlier this year). The reason you might be blaming it on Meijer is because the Speedways in Grand Rapids always seem to not go up until about 60 or 90 minutes after Kalamazoo and the rest of west Michigan. I had noticed this on Speedway’s own website for quite a while, and I thought there was something in the automation that caused Grand Rapids to take longer to update (Schoolcraft is always slow to update, so I thought the same thing was happening to all of Grand Rapids). I’ve noticed this same pattern on GasBuddy as well, that Speedway prices in Grand Rapids go up about 60 or 90 minutes after Kalamazoo and the rest of west Michigan. So, it is possible that a Grand Rapids area Meijer could go up before a Speedway station in Grand Rapids, if Meijer bases its resets on what Speedway is doing in Michigan outside of Grand Rapids, its home territory.

    For the July 5 increase, I recorded 2 Grand Rapids area stations reported at the new statewide Speedway price before the first report of a Grand Rapids area Speedway at the new price:

    10:59 BP, 7100 Fulton, Ada
    11:48 Marathon, 781 68th St SE, Cutlerville
    11:56 Speedway, 5173 Broadmoor Ave SE, Kentwood
    12:06 Speedway, 2360 28th St SW, Wyoming
    12:17 Speedway, 9266 Cherry Valley Ave SE, Caledonia
    12:29 Speedway, 4390 Byron Center Ave SW, Wyoming

    On July 5, the first Speedway in Michigan reported at the new price was in Oshtemo Township (Kalamazoo) at 10:25 a.m.

    On July 5, the first Meijer in Michigan reported at the new price was in Rochester Hills at 12:37 p.m.

    Speedway’s website is usually updated with new prices about 10:45 a.m., so it is possible the BP in Ada and Marathon in Cutlerville monitor Speedway’s website. I have never seen Speedway’s website update with new prices before the first reports from GasBuddy spotters. As I keep exploring while the resets are just beginning, maybe I’ll discover those two stations always at the top of the list. If they were to keep coming in first all the time, we’ll have to conclude they are monitoring Speedway’s website or something other than street prices.

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