Valero Energy Leads Gas Prices Higher
16 comments Thursday, 01-31-13 | Posted By Ed Aboufadel | Commentary
Comment on the January 14 prediction: They waited until the end of that week to hike prices, so the prediction was WRONG.
Thursday, January 31, 2013, 2:35PM: Arrggh. With my recent travel and work schedule, it has been hard for me to keep up. I updated my charts late last night, and saw the possibility of a price hike today, but I didn’t get this post out in time. $3.75?! Well, it is hard to blame the retailers, as their costs have shot up about 50 cents a gallon in the past two weeks. And, in fact, January is usually not a kind month for motorists when it comes to gas prices. The surging stock market hasn’t helped, although I was surprised that gas prices were pretty calm the first half of January.
I’ve started tracking the price of a share of Valero (VLO), the big gas refiner. This article in Futures Magazine suggests VLO may be a good predictor of gas prices. Some recent convincing evidence: VLO has gone from $32 in December to $43 now. And they are making great profits! –Ed Aboufadel
Hi Ed, please let me know how are exact number for the calculation in your formula is determined? where to find them? Is it okay to be startled by the sudden increase in gas prices at the pump specially when the stock prices of crude oil is falling, it fell by around $0.76 today!
thanks,
Skyler
Ed: If it is true what you said in my post about margins being pushed higher, that is a big cause for concern. Either we are missing something in taxes and fees that is new, or they are charging us more with no rhyme or reason.
One possibility in my mind is credit card fees. Speedway and a local chain called Rickers (they sell mostly BP) have incentives for you to have your checking account attached to their rewards/members card so they can avoid these fees. This is 10¢ of at the Rickers, Speedway varies, but I believe it is 3¢ now. The whole industry could be pressing margins up to cover the cost of fees anyway.
Just a thought.
Here’s how my calculation works right now:
Start with the Chicago Spot price from Bloomberg (http://www.bloomberg.com/quote/CHOR87PC:IND). Call that S.
Add 31 cents for profits, transportation, etc.
Multiply by 1.06 because of the 6% Michigan Sales Tax.
Then add 19 cents Federal fuel tax.
(S+31)*1.06 + 0.19
That turns out to be a pretty good approximation to the price to retailers.
My calculation is close to that. For Michigan taxes, the formula is this:
((S+F)*.06)+S+F+M
Yes, in Michigan they actually add the Federal tax (F) to the cost of fuel we get from the spot (S) and then calculate the state sales tax. Then they add cost (spot), Federal (18.4¢) and Michigan (M)(19¢) taxes. I then add an additional 28 cents for other fees and taxes, and we should come out with how much they are profiting. This should come close to predicting a spike, when the profit margin becomes zero or below.
Gas is not a big profit margin for the C-Stores out there. That would be that $1.25 candy bar, and $1.50 soda. They used to get about 2-5¢ margin per gallon, but I’m not sure how much that has changed.
thanks Ed and Bill,
Bill why do you add S and F twice? it puts an additional 18.48 cents!
i am guessing that S is given in cents per gallon???
skyler
((S+F)*.06) – this calculates the Michigan Sales tax, which is 6% of the spot price and the federal tax. Then we add that tax with the actual spot price, the federal gas tax, and the state gas tax.
Yes, Michigan charges sales tax on a federal tax.
Hi. I live in Northwest Indiana……I saw the link to the Chicago Spot Price. Is there a link that lists the Chicago RBOB spot price? In the Spring/Summer months, the three Northwest Counties tend to be 10-15 cents higher than the rest of Indiana. Having the Chicago RBOB spot price would be helpful in predicting our hikes.
jjdm, the closest is probably this:
http://www.bloomberg.com/quote/G3OR87PC:IND
Ed,
Here are my costs for the few weeks
17th 3.23
18th 3.28
21st 3.32
22 nd 3.34
23 rd 3.34
24 th 3.34
25th 3.38
28 th 3.43
29th 3.54
30th 3.57
31st 3.61
1st 3.65
Maybe that will help your math work out.
jjdm…
You can find the RBOB premium over the CBOB spot price Ed uses if you go to
http://customercenter.murphyoilcorp.com/index.cfm?show=803&product=DTNMKTWRHEADLINENEWS&id=07020A40
Problem is the last 2 characters can be anywhere from 40 thru 6F using binary arithmetic (and sometimes 70, 71, 72)
all kinds of gas related stores are found at the web site and they usually cycle all those numbers in 2-3 days. Usually the Midwest or CHicago (headline) report shows up between 330-430 each afternoon so it may take trying a few numbers to find the right story.
Its been running 4-6 cents over the CBOB spot price recently.
You can find actual average contract wholesale for RFG CHicago Terminals at
http://www.axxispetro.com/download/wisconsin-cta.txt
And not to steal anything from Ed but you’re welcome to check out my thread which predicts Speedway price hikes in Chicagoland, although NW Indiana does not necessarily happen the same day
http://chicagogasprices.com/Forum_MSG.aspx?master=1&category=1083&topic=347330&page_no=1&FAV=N
$3.69 a gallon at Greedway,
exit 92 off I-75 in Ohio.
SW Ohio finally spiking. $3.699 as mentioned above.
Thank you Ed and Jim!!
“SW Ohio finally spiking. $3.699 as mentioned above.” Welcome to our world ChrisDG74 LOL. Saw a station in Anderson, Indiana posting $3.95 and luckily it was the lone ranger. Place across the street was $3.65. I spied a station on I69 yesterday coming back from FWA airport at $3.58 around Fairmount.
Can’t believe there haven’t been any spikes this week, but it is only Wednesday.
It is so funny to read articles about gas prices written about the nation, or some other state than one that has Speedway. I read a couple over the weekend, one was a link on Drudge, and they talked about how gas has gone up 30 cents in the last 3 weeks. Geeze, they need to be in Indiana, where we spiked 30 cents three times in a week. Now that’s fun.
I’m just glad that there is a Sams Club nearby.
There isn’t much that is more annoying than the ole’ jump 20 cents and trickle down one penny a day until the next 20 cent jump