# 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

Updated: November 18, 2012 — 7:00 pm

1. Ed,
Cost today 3.39 Friday was 3.34

2. Channel 8 is doing a news story about gas prices going down. Whenever they do a news story about gas, it seems there is a spike within the next 2 days. So, i’m going to predict a spike on Tuesday.

3. Hell, I’ve seen the spike hit BEFORE the news story even hits the air. The best is when they have someone standing in front of the sign as it changes(goes up).

4. Chicago unleaded is up 11.77¢ just after 12:00 noon. Brace yourself for a good spike before Thanksgiving, betcha.

5. Figured we’d get a spike tomorrow, regardless of what wholesale did. I bet Ohio sees either \$3.659 or \$3.699 tomorrow.
Looks like it’s time to cash in my 2000 Kroger points and get \$2/gallon off.

6. It IS a holiday week, we WILL have a spike – LOL!

7. At the risk of stating the obvious, why is it that other products, including commodities, are not as sensitive to the daily ups and downs of commodity exchange prices?

You don’t see Burger King rushing to update menus every time beef goes up in the Globex…

8. A barrel of oil is conveniently up on the middle east unrest which I’m sure will reflect in the Chicago Spot price. Greedway states can expect another 20-30 cent spike by week’s end….just watch.

9. One can only imagine the hilarity of the Speedway effect if it applied to, say, beef… “Hundreds of Burger Emperor restaurants raised prices by 20 cents a burger after a herd of cows broke thru a fence and escaped without a trace. In response, the Chicago Board of Trade raised its prices on beef futures by 10.23 cents a pound”

Seriously, now, what is the point of having commodities future trading if it is used by a specific company towards a goal (wild retail price fluctuations) that is exactly the opposite of what commodities futures trading was established to prevent (i.e. wild retail price fluctuations)?

10. Ohio has begun jumping to \$3.599. Visual confirmation.

11. The price is \$3.659 for Michigan. Glad I got my E30 for \$3.339 this morning.

12. 3.659 in Grand Rapids (East side). So much for no spike.

13. Using your formula above, I calculated \$3.59 today based on the jump in the Chicago SPOT. Using that, I was able to fill up this morning for \$3.35 before it jumped to \$3.65. Thanks again!

14. This was a quick settling spike to boot. I got the Meijer notification around 11:00 AM and it was well on its way. I did fill up for \$3.28 but this time it ‘felt’ different.

15. Another concern is diesel and other distillate fuels. Diesel in many areas went up to \$4.19, and even \$4.39 at the Meijer on Tittabawassee in Saginaw, for example. I know this is the time of year that diesel and other distillate fuels are more expensive, but a 30 cent hike like that for diesel is too much.

16. David, you are welcome. I filled up yesterday morning, too, at \$3.49, because I needed gas, but my prediction was WRONG. Sorry to all!

We got a one-day spike in the wholesale price on Monday, which gave them the excuse to raise prices, but that wholesale spike started subsiding on Tuesday.

I am starting to work back in my data and it does appear that Speedway and friends have been pushing margins higher, at least since April. That has been throwing off my calculations and leading to more WRONGs.

17. I have been giving this increase in profits some thought. I have no empirical evidence, just anecdotal: The quick marts, such as Speedway, used to depend heavily on the inside traffic to drive profits. The daughter of an independent quickie mart here in Fort Wayne told me that the inside traffic/sales have fallen by about 10%. Thus taking the profit on chips, pop, pretzels, etc have dropped by about 33%. So the profit has to be made up someplace.

Makes sense to me. But it is only an anecdotal explanation. People, myself included, have a lot less free \$\$ to spend anywhere.

18. Maybe people are getting smart, and not buying anything inside. Their prices are outrageous to begin with.
Now, if only people would stop getting gas at Greed/Speedway.

19. There were some stations in the northern part of town that were \$3.059 before the jump yesterday. They went up TWICE yesterday, first to \$3.219 and then to the memo/collusuion price of \$3.599.

20. Went to 3.65 and I noticed the Speedway at leonard and 131 was one of the first. NEXT day even the prices in Rockford hadn’t changed YET so I filled up at 3.54..oh boy I have three extra dollars in my pocket! On the way home from work last nite everyone uip here fell on the bandwagon of 3.65. “There is money to be made from these travelers of the holiday, lets take them!”
Whatever. At least we don’t live in the Middle East…and that I am truly thankful for.
And Turbo, great analogy!

21. Ya know it baffles me that so many people (or maybe they don’t) know that Speedway controls a lot of how the gas prices rise and fall, yet in Charlotte on any given day, the parking lot of Speedway is jam packed and the QD across the road is empty. Also, can anyone explain to me why the independents and other stations find it necessary to follow Speedway and hike prices. It seems to me that if Speedway were to hike to \$3.65 and QD were to stay at \$3.35 (the price yesterday) or hike to maybe \$3.50 that Speedway either would follow suit or QD and others would gain more business. I understand the margins and making more money, but if QD is making a profit of 5 cents a gallon and Speedway is making a profit of 20 cents a gallon, yet QD is getting 10 cars buying 10 gallons each to Speedway’s 1 car, QD is still making a larger profit. Not to mention that if I buy gas at QD, I generally go in and buy a water or donut or pop and spend more money there. I guess I just don’t understand this theory that Speedway controls the Midwest market. It seems more like all stations equally are just itching to hike prices.

22. Steve, I’ve asked myself the same question for years. Why is it on one day, the competitions competes and on another day, it doesn’t?

23. Excellent analogy, Turbo!

24. There are some additional strange analogies I could come up with that defy explanation when used in our context.

For example, we’re told that if prices at the terminal rise, the gas in the underground tank of a gas station all of a sudden becomes more expensive because of ‘replacement cost’. At the same time, if the prices at the terminal drop, ‘replacement cost’ goes out the window and now it’s ‘I bought expensive’.

I remember reading about this from businesses selling PC processors. Say, a mail order or bricks and mortar retailer would have a few Intel P4 2.4’s sitting on the shelf for \$200 and Intel would have their regular scheduled model introductions and price cuts dropping the 2.4 to \$160. Hard as it may sound to believe, consumers actually expected to see the updated prices on retail stock never mind what the retailer paid and eventually we saw retail follow Intel price cuts pretty quickly. On a couple of occasions where Intel raised prices for one reason or another retail prices rose also.

But hey, it’s not like anyone is watching. I just finished reading a book on tape about energy in general (The Quest: Energy, Security, and the Remaking of the Modern World by Daniel Yergin). Waste of time actually but one point he made was that during the major mergers of the late 90’s the Feds were concerned that no company ends up owning more than a certain percentage of the market… Of course, we all know how seriously this was taken, but it is interesting to notice that in our 5-6 state area of concern, the market share attributed to our favorite company is considerably higher than the percentages the FTC was concerned about during the mergers… Not, of course, that the FTC did anything about any of the mergers…

25. With Kroger stores doing their 4x fuel points on gift cards, I was able to cash in 2000 points yesterday. Filled up both cars for \$1.419/gallon. Take that, Speedway!!

26. I can’t say how accurate it is, but here in Fort Wayne, there is a Marathon on the South Side that is selling gas for \$3.11, and on the the near NW side, there is Kroger, Shell, and Speedway selling gas for \$3.35. Most stations are in the mid \$3.40s. Some are above \$3.50. This is a very wide range which may lead to a local reset? The zero margin, I calculate to be in the low \$3.40s, and it looks like the local average may be getting close.

27. It’s been a few months since I’ve posted here.

Since I last posted, Speedway redesigned their website and finally got around to creating a Twitter account. Their first tweet was posted on October 8, but they created the account on September 28.

Followers: 83

Klout Score: 40.31, True Reach: 0

28. Chicago spot holding steady, WTI Crude nearing \$90 and an Indiana Spike Line deviation of about 16 cents. Sounds like the perfect excuse for Greedway to run it up once again this week.

29. I was gonna say – gas has dropped quite a bit this last week – hence, yeah, I would imagine so. Hopefully not until tomorrow, but, my tank is full as I got it over the weekend.

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