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

Posted in Commentary, Predictions
50 comments on “Post-Sandy, the Plan for the Week
  1. independent retailer says:

    Ed,
    Cost is 3.32 today.

  2. Tire man says:

    $3.55 in Grand Rapids, MI today

  3. Sam says:

    Yep – filled up in Greenville this weekend @ $3.16 [then 10 cents off with Meijer credit card] and today it’s going up to $3.55 already this morning.

  4. Derek says:

    Prices at 3.55 in Grand Rapids and Kentwood.

  5. ChrisDG74 says:

    Sounds like someone’s getting a little greedy.
    Nothing in Ohio, yet…..

  6. Ankur says:

    Its 3.27 in Canton Mi (Ford Rd and Canton center rd).

  7. Mike - Kalamazoo says:

    3.55 Kalamazoo

  8. Ed Aboufadel says:

    Thanks, independent retailer. I am off a bit.

    $3.55 just in time for Election Day. I thought they’d wait a bit.

  9. Ed Aboufadel says:

    Stations are taking their time with this hike, though.

  10. Chris says:

    Gas Buddy is showing Indiana going up. Hmmmmmmmm. The last increase 10 days or so ago was weird as Indiana was one of only two states that was going up. Wonder what the excuse is this time??

  11. Kalena says:

    Looks like it is pretty much $3.55 across the board in the Wyoming area.

  12. Sam says:

    Well, they ARE giving it away in the hurricane Sandy area, Chris – I’m guessing they have to make up the difference somewhere and here obviously seemed like a good place!! LOL!!

  13. ChrisDG74 says:

    $3.499 in Ohio. Thanks, Greedway.

  14. Sam says:

    Again, tiny little Rockford, Michigan – 2 station on Belding Road still $3.34 while right in town is $3.55.

  15. TimmP says:

    Is it just me, or are the stations that went up a bit slow to come back down a bit?

    I also get the feeling that we are seeing the new low price. Especially since we have an energy hating administration for another four years. Go ahead, flame me.

  16. turbo46032 says:

    With the apparent disconnect between crude, gasoline, and supply/demand all bets are off. We had similar shenanigans during “energy loving” administrations and I did not recall much of a relationship between White House energy attitude and prices.

  17. Andrew says:

    Another refinery went down on the East coast, so, possibly a reason for them to hike gas 20 cents again?

  18. Norm says:

    Prices in Waterford took a big jump this morning but Greedway hasn’t yet gone up.

  19. ChrisDG74 says:

    Greedway’s gonna be jumpin’ tomorrow.
    On a side note – Gas in Pigeon Forge TN was $3.029 this morning. You can tell where Speedway’s presence stops.
    Southern KY – $3.099-$3.149
    Lexington KY – $3.459

  20. turbo46032 says:

    Meijer just sent their alert for another hike. Given how many stations in Indy are already at 3.39+ we’re going back to 3.69 or worse while nothing worthwhile is happening with demand, crude cost, or refining.

    Fore!

  21. ChrisDG74 says:

    Ohio just went to $3.599.Another Monday morning Speedway present.

  22. Daniel G says:

    EXCELLENT REPORTING on that .35 cent rise in prices today in your home area of West Michigan guys…oh yeah you didn’t. Went from 3.35 to 3.69 in one hot minute.
    And Turbo YOU got it right and you’re 300 miles south of here!

  23. independent retailer says:

    Chicago spot closed up 20 cents on Friday.

  24. ChrisDG74 says:

    independent retailer
    Chicago spot closed up 20 cents on Friday

    —Which put it at what, $2.75? Not high enough to justify $3.599 in Ohio.

  25. Daniel G says:

    Or 3.69 in West Michigan. Only thing I can think of is firearm deer season opens this week and Thanksgiving driving week next week.
    Noticed Gasoline at $2.66 on the market tonite. Just had a natural gas conversion company on Cramer. Good things said about natural gas equipment conversions here in North America. Why arn’t we doing more of that? Soon? I know natural gas drilling is down right now BECAUSE they found TOO MUCH OF IT. We haul frac sand out of GRR to various Marcellus shale plays and to Texas and North Dakota. That business is down probably 20% right now.
    Gee, natural gas for your car, with a compressor right at home? Imagine that!

  26. Chris says:

    The election’s over, time to crank it up. Last weeks 20-30 cent spike wasn’t enough so Indiana is going up another 20 cents or so. I saw Ohio going up and when that happens, Indiana follows.

  27. TimmP says:

    Why such a HUGE disconnect in retail/wholesale pricing? If I am reading this graph correctly, we are seeing retail prices akin to $96 oil, not $86.
    http://www.FtWayneGasPrices.com/retail_price_chart.aspx?city1=Ohio&city2=Indiana&city3=Michigan&crude=y&tme=1&units=us

    Just what is happening? Looks like we need a real break and not going to get it.

  28. Sam says:

    Just read this article:

    http://www.woodtv.com/dpps/news/national/aaa-thankgiving-travel-should-increase-slightly-nd12-jgr_4966456

    And in part, it reads:

    A dramatic drop in gas prices should help holiday travel. The national average has declined 35 cents per gallon in the last month. AAA expects further declines through the holiday, although the price of gas on Thanksgiving Day should be close to last year’s record of $3.32 per gallon.

  29. independent retailer says:

    Daniel and ChrisDG74,
    Not looking for an argument, just some feedback. First off I do not agree with the way Speedway does business. I don’t agree with whatever their pricing strategy is. That being said you talk about a “justified” price. How do you figure that price? What is an acceptable margin for me to make? On the day the price went to 3.69, my cost was 3.53. (That is a 4% margin).

  30. ChrisDG74 says:

    IR – I am using historical margins, if that makes any sense. It used to be that Gree, I mean Speedway in Ohio would spike to the spot price + 60-70 cents(state/federal taxes are 42). It was this way for years. More recently, they have increased that margin to 80-1.00, yesterday’s being about 85.

    I pointed out that stations outside of the Speedway influence in KY were priced 30-35 cents lower that the areas inside the influence. This was on Sunday. I’m sure those stations that were 30 cents lower were getting by just fine. If they were getting by just fine, imagine how Speedway is doing.

  31. turbo46032 says:

    If you are making 4% at the top of the spike and presumably lose 4% at the bottom, your net profit margin thru an up / down cycle is zero or very close to it.

    At the same time, retailers in non Speedway states manage to maintain more stable prices and still stay in business.

    Did it ever occur to anyone that consumers in Speedway states might actually be refusing to come inside and spend more on the high margin items just to “get even”?

    Put another way, what would Speedway / Marathon do if independent retailers refuse to play along every week?

  32. Jeff says:

    IR-
    How often do you receive deliveries? What I have a problem with is the mass increase in prices for inventory that was already in storage and bought at much cheaper prices. Yes, your margin may be 4%, but that is on future purchases not what is in your holding tanks. Your margins have to be higher than 4% when we see the gas station cartel increase prices at the same time when I highly doubt ALL of them received new deliveries to justify increasing the price on that day. I understand its keeping up with the Joneses, but its getting out of hand. I think the local congressman or woman need to get involved.

    Jeff

  33. Ed Aboufadel says:

    ChrisDG74, I agree with you that Speedway and friends are trying out higher margins lately, especially with yesterday’s hike (that I was a bit surprised by). Driving in to work this morning, the Citgo in Standale was already down to $3.61, vs. $3.69 for its neighbors. That’s a sign of making a real stretch when it comes to a price hike.

  34. Pat says:

    In SE Michigan, our Costco only raised prices to 3.37, and some of the Speedways in the area backed off to 3.55 in the evening.

    Was there any reason given for the large spike in prices on Friday, followed by drops on Monday and Tuesday?

  35. independent retailer says:

    To answer some of the above questions I have this to offer. As far inventory on hand when prices go up. Yes sometimes I have fuel in the ground when the street price goes up, also sometimes I have fuel in the ground when it goes down. I would call that a “wash”. Also you have to keep in mind quite often I am selling below cost when the spike comes.
    As far as getting even don’t buy fuel or anything at Speedway. If you spend money there you are showing them you support their business practices.
    As far as playing along, we don’t have a choice. As you know people are price sensitive to gas. I have customers who will drive 10 miles out of there way to save 5 cents per gallon!!!
    That being said I ask again, what is a fair profit per gallon??

  36. ChrisDG74 says:

    I don’t have an answer for what a “fair” margin would be. But I do know that there is nothing fair about a 40-plus cent Speedway spike, like the one we had last week. I don’t even put air in my tires @ Speedway. They want 25 cents MORE than everyone else to use the compressor ($1 vs 75 cents). Their greed knows no bounds.

  37. TimmP says:

    Fair margin? Excellent question. Some groceries do it well at 2% and loss leaders. Kmart sells notions at 200% markup, and loses on Morton Softener Salt.

    Fairness is what the market supports. Supports in fact, not in fiction. NOT via regulations from government, or government involvement in the markets. The government is probably a drag to the equivalent of 60% or more of the pump price through taxes along the way and regulations on importation, care, transport, enviro regs, and more.

    And everyone in a Prius (or the like) will only result in road taxes being levied via GPS and Gasoline, and fewer places to buy your gas resulting in less choice, less competition, and higher prices too, in addition to the GPS/mileage taxes.

  38. Turbo46032 says:

    IR,

    perhaps I was not clear in my question on playing along. Let me ask again… Let’s say you do not play the up/down game and price your product like independent retailers in non-Speedway states.

    The way I see it you’ll be cheaper during the spikes, a bit more expensive at lows, and so on. Hopefully if enough independents do this, things may change…

  39. Sam says:

    Sam’s Club – Alpine Avenue today – $3.45 w/Sam’s card, it’s less than you can get at any Meijer w/a Meijer credit card in our area. Personally, I never EVER buy from Speedway and I never buy from inside the store.

  40. Daniel G says:

    IR, my implications are NOT against a retailer such as yourself. They MUST react to what their suppliers do with them. And they do DO WITH THEM. You have very little choice in that game. Its the suppliers that set the price and if and when we might get a reason as to WHY they spike a price amidst lower barrel price and slack demand might be nice. Refinery explosion? Pipeline disaster? Well and good, I can see that but when nothing happens and price goes up 35 cents? I see it as the ‘big guys’ want to put some cash in their pockets and take it from us the consumer…no law of supply and demand, just ‘hey lets see how much we can hit em for this week’…good for shareholders I guess.
    Then again…why do we get jiggy about 6 bucks a tankfull more? How much bottled water will that buy? I guess because it VISIBLE right up there on the sign.

  41. A.W says:

    It seems to me as though what really matters is not necessarily the profit margin per se, but rather the rapid increase in the price. To explain, I have been visiting the San Francisco Bay Area a few times over the years. I notice that (at least compared to how it is here) prices hardly seem to move (I also wonder if that’s why I can’t seem to find one single electronic sign in the entire Bay Area- they’re all manual). That’s not to say that they don’t move at all, or that those out in the bay area don’t see price hikes at all… they just don’t seem to notice price changes. If that’s how it worked here, then we probably wouldn’t be having this discussion.

  42. ChrisDG74 says:

    Of all the places in the country I’ve been(outside of the Greedway Belt), all along the East Coast(ME to FL), Bay Area in California, Nevada, NONE have Greedway’s spikes.

  43. Mike - Kalamazoo says:

    What gets me just as much is how the state governments won’t do anything about it. You don’t even hear a peep out of them. Of course they aren’t buying their own fuel, we are probably paying for that too..

  44. Chris says:

    I just flew back into Ft Wayne yesterday after being in Chesapeake, Virginia for two weeks and the Wawa across the street went from a high of $3.21 a gallon, down to $3.15…all this while Greedway states spiked during those two weeks. Saw some stations as low as $3.05.

    I spend about 9 months of the year on the road, primarily east of the Mississippi, and the biggest spike I have ever seen in a non Greedway state is about 8 cents a gallon in one shot. That would equate to a 50 cent increase in a Greedway state. I just cringe when I see it coming and always let my wife know when to fill up. I still can’t understand how they get away with it. I never go there fortunately. Over the summer it sure was nice to fill up in Greenville, SC for just $2.65 a gallon….too bad it was a RENTAL CAR lol.

    I know one thing’s for sure. When I retire it will be far away from any Greedway locations!

  45. Turbo46032 says:

    Mike, the majority of gasoline-buying people don’t know or care about the Seedway Effect.

    I work in a firm full of intelligent engineers (is there any other kind :-)) and it took forever for most of them to even figure out that ‘Dime Thursday’ was real. That was nearly 20 years ago. Right now you could have a Seedway at $3.59 and an independent across the street at $3.19 and you’ll still see people filling up at $3.59.

  46. Tom Rush says:

    Gas is going around $3.64 here in West Michigan, what’s the deal with that?

  47. Daniel G says:

    Ummm, oh Tom, read the above 45 threads on this board….
    I knew a folk singer named Tom Rush from years ago…..good stuff.

  48. Sam says:

    And in the news today . . . . which should prove to be a spike next week???

    http://finance.yahoo.com/news/gaza-offensive-may-trigger-5-134812985.html;_ylt=Ai37aSDfAc7udPgZ_dc69CKiuYdG;_ylu=X3oDMTQ4ajE5cDBnBG1pdANDTkJDIFRvcCBTdG9yaWVzBHBrZwNiZmZiOGNmZC0yZTRhLTM3MTgtOTFhMy1iMjc3OTlkN2FiMjMEcG9zAzEEc2VjA01lZGlhQkxpc3RNaXhlZExQQ0FUZW1wBHZlcgMxMWRhOTNhYy0yZjJjLTExZTItYmJkZS0wZTk1N2I4NWI4NmE-;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3

    The article reads in part:

    The latest bout of turmoil to grip the Middle East – Israel’s offensive against Palestinian militants in the Gaza Strip – could trigger a spike in U.S. crude prices past $90 a barrel if the conflict escalates, said an A rocket launched by Palestinian militants makes its way from the Gaza Strip(AP Photo/Ariel …expert, but the move higher will be short-lived since well-stocked global inventories should cushion the blow from any supply disruption.

    “There’s a possibility of a $5 spike in premium over the next week if there’s escalation…if there’s ground movement, if the Israeli army moves its infantry into the Gaza Strip,” Andrew Su, CEO of Compass Global Markets in Sydney told CNBC’s “Squawk Box,” on Thursday.

  49. Derek says:

    It sure is something to move about the country and recognize the disconnect “Greedway” states have.

    Chris said above he got gas for $2.65/gallon in SC this summer. I was right there with you. I drove through SC 4 times this summer and filled up for 70 cents less/gallon than if I was in Michigan.

    While living in Western North Carolina the average jumps would be 15 cents at a time, and a VERY RARE 20 cents. The jumps we see here are plain outrageous.

  50. TimmP says:

    A year ago, oil was more than $10 higher, and the retail price was 40 cents lower.

    http://www.FtWayneGasPrices.com/retail_price_chart.aspx?city1=Ohio&city2=Indiana&city3=FtWayne&crude=y&tme=12&units=us

    Just not right.

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