Month: May 2018

Gas Over $3 — Who is Profiting?

Comment on the May 6 prediction: CORRECT about the under-hike on May 8, but not prepared for $3.09 on May 14.

Sunday, May 20, 2018, 9:00PM: In the past year, gas prices have climbed from $2.40 to over $3 a gallon, following oil prices that have soared from $47 to $70 a barrel. Who’s profiting? Clearly oil producers such as OPEC, Russia, Texas, and North Dakota. And how about Valero Energy, an oil refiner and nationwide gasoline retailer, particularly in California and Texas. You could have bought a share of VLO for $62 a year ago. On Friday, the closing price was $120.56. Nice profit for shareholders! I wish I bought some shares, as I worried about $3 gas.

Well, what about the rest of May? Wholesale prices continue their climb this month, and I’m sure they’ll reset prices this coming week, maybe as soon as Monday. At least back to $3.09, and $3.19 is highly probable. -EA

Gas Game Class Is In Session

Comment on the April 18 posting: CORRECT, as prices rose to $2.95 the next day, as predicted.

Sunday, May 6, 2018, 9:00PM: As we bump up against $3 gasoline, let’s review how our calculations work. It starts with RBOB = reformulated gasoline blendstock for oxygenate blending, in other words, the unleaded gas that we buy at the station. The wholesale price for RBOB is set via trading on markets in places like New York and Chicago. In my spreadsheet, I start with the end-of-day RBOB quote that I can find online.

Actually, RBOB makes up 90% of what you get at the pump. The other 10% is ethanol, which is cheaper than RBOB, so I have a spreadsheet calculation like 0.9*RBOB + 0.1*Ethanol. Next is to add on Federal gas tax of 18.4 cents per gallon and about 18 cents to take into account transportation, middlemen, etc. Then, we tack on 6% sales tax, and in Michigan, 26.3 cents per gallon of gasoline tax (to *eventually* fix the roads). Friday’s RBOB quote of $2.12 converts to an estimated cost to gas stations of $2.83. So, if the price is near $2.83, it is time to predict a price hike. Hikes tend to tack on 10-25 cents to that cost that I calculate.

This evening, prices in Grand Rapids vary from $2.68 to $2.95, so we are wandering back into price hike territory again. I imagine the debate in gasoline headquarters is to under-hike back to $2.99, or do a standard hike which would take them to $3.09. Whatever they decide, I’m sure we’ll see a reset this week, probably on Tuesday, so I am going to fill up on Monday morning — $2.70’s on Alpine Ave! -EA

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