Comment on the April 11 prediction: Prices rose to $3.99 on Friday the 13th, not Thursday the 12th, so I am going to grade this 3/4 CORRECT, 1/4 WRONG. Then, prices drifted lower for two weeks, until Thursday’s re-set to $3.89.
Saturday, April 28, 2012, 8:20AM: For educational purposes, let’s take a look at Thursday’s price hike. Completing my Gas Game spreadsheet Wednesday night, I had recorded a NYMEX price of $3.14 (averaging the current and next month’s futures price) and a Chicago wholesale price estimate of $3.00 per gallon. These days, I tend to use the Chicago estimate, and it corresponds to an estimated price to retailers of $3.70. Historically, retailers have gone to as low as 10 cents below current cost before initiating a price hike, and then they usually hike to 10 cents above cost (what I used to call the 20-cent margin price). So, the price hike was a bit of surprise to me, as I was recording prices in the $3.70’s in Grand Rapids, and the upper $3.60’s in Fort Wayne, and the hike was to $3.89 (kind of a 30-cent margin price). It is as if the Chicago wholesale price was $3.10, not $3.00. Further evidence that this was an unusual price hike includes the following: (1) as reported on this site in the comment sections, some non-Speedway retailers were rather slow to agree to the hike; (2) retail prices in Fort Wayne have already dropped at least 6 cents a gallon, and they are at $3.72 a gallon on Fuller Street in Grand Rapids; (3) my brother called from Fort Wayne and complained about Thursday’s hike, which he rarely does.
Looking to next week, wholesale prices jumped a bit on Friday, and retail prices are already all over the place. That feels like one of those situations where some time next week, there will be a price reset ($3.89 again?) that all the stations agree to almost immediately. I’m sure the secret e-mail will say, “No fooling around this time.” -Ed Aboufadel