Month: November 2012

How I Do My Calculations These Days

Comment on the November 4 prediction:  The hike I predicted for November 8 came two days early, up to $3.55.  Then, we got another hike last week, to $3.69.  Feels like the best call here is WRONG.

Sunday, November 18, 2012, 7:00PM:  Here is how I have been doing my calculations lately.  I have been estimating the cost to retailers in this way:  start with the Chicago Spot Price from Bloomberg, ($2.645 at the close on Friday), add in an estimated 10-cent profit for the wholesaler, 18.4 cents Federal gas tax, and 3 cents for miscellaneous costs such as transportation and storage ($2.959). Then, add in the Michigan taxes (6% sales tax plus 19 cents per gallon), and we get a base cost to retailers of $3.33 right now.  When we get a hike, the new retail price is on average about 15 cents higher, so if there were going to be a hike on Monday, the new price would be around $3.49.  Currently, retail prices in the Grand Rapids area are in the $3.42-$3.59 range, so I’m not worried about any price hike coming up, and maybe we’ll make it through Thanksgiving week OK.  That hike last Monday to $3.69 was due in part to an mysterious two-day spike of 16 cents in the Chicago Spot Price, a spike that has settled down.  Go figure.  — Ed Aboufadel

Post-Sandy, the Plan for the Week

Sunday, November 4, 2012, 8:15AM EST:  Sandy hit New Jersey and New York City hard, but the effects on gas prices in the Midwest were minimal.  In fact, last night, I saw gas selling for $3.17 a gallon in Lowell.  In New Jersey, tough anti-gouging laws kept prices stable for the most part, and voluntary even/odd rationing has been implemented short-term.  Also, “the US government temporarily suspended the Jones Act, which requires that vessels moving between US ports must be US-flagged. The suspension means that foreign-flagged vessels can help move gasoline from refineries in Houston to New York harbor.”

Back to Michigan, I calculate that retailers are paying about $3.22 a gallon for gas right now, which corresponds to a retail range of $3.12-$3.39.  With actual retail prices in the $3.17-$3.49 range, I predict this week will play out as follows:  prices continue to drop, with more places below $3.25, and then a system-wide re-set on Thursday, which could be $3.29, $3.39, or $3.49, depending on how the futures markets play out. –Ed Aboufadel

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