Comment on the January 31 prediction: We saw price hikes on February 3 and February 10, up to $2.35 and then $2.39 in Michigan. I was CORRECT on the first one, and I should have predicted the second one, so add one to the WRONG score.
Wednesday, February 11, 2015, 9:30AM: Yesterday’s price hike confirms that we are back our usual game rules. Since I haven’t done so in a while, let me explain the calculations. We start with an estimate of the wholesale price set in an electronic market. Thanks to my Gas Game colleague Bill, we have several places on the Internet to hunt around for daily reports like this one. The Chicago CBOB price at the end of the day Monday was $1.58. We also have to take ethanol prices into account, which you can find many places online, and a recent quote is $1.41. With a 90% gasoline/10% ethanol mix, we do the same with the prices, add 18.4 cents for the federal gas tax and 15 cents for a variety of profits taken by various businesses on the way to the retailer, then add in sales tax (still 6% in Michigan) and the state gas tax (still about 19 cents a gallon). As of Tuesday morning, that gets us to a 0-margin price of $2.23. (The biggest fudge factor in there is the 15 cents, which I adjust from time-to-time as retailers report to me on what they are paying to fill their underground tanks.) If the retail price is near the 0-margin price, then a price hike is close by, usually 15- to 20-cents above that 0-margin price. As I had gas prices in Standale at $2.19 on Tuesday morning, we got the hike to $2.39. (I was hoping they would wait an extra day, and I didn’t make time on Monday night or Tuesday morning to post.) So, that’s how it works. -EA