Category: Announcements

The Spike Line Calculation Adjustment

Two sharp-eyed readers recently commented that the results showing in The Spike Line didn’t match what they calculated using the formulas shown on the page, and those in turn skewed what was showing in the charts. Their comments spurred me to take a look at the spreadsheet that I update daily and underpins what you see on both “The Spike Line” and “Today in Oil” pages. As it turns out, the readers were correct – there were some deviations between the calculations in the spreadsheet and the displayed formulas.

The differences were not dramatic; the actual variances were between roughly 1 and 3 cents. That was enough, though, to throw off when the numbers and charts predicted a spike. I’ve since adjusted the spreadsheet calculations to match the formulas, so anyone doing the math should be reaching the same result. Ohio was not affected, as the formula and calculation matched.

Thanks for following The Gas Game and letting us know! -CP

For the New Year, Let’s Review How We Play the Game

Comment on the December 17 predictions:  The GR hike occurred as predicted, so CORRECT.  For hike #2 …

Saturday, December 31, 2016, 1:30PM:  Even though prices are below cost to retailers in Michigan, it appears that they are holding off until the gas tax hike on Sunday to just do one big hike (and blame it on the Governor).  As a refresher, here’s how the calculation works, leading to an estimate of the new price:

1.  Start with a CBOB market price.  One one to do this is to take the NYMEX RBOB price (posted on our web site) and adjust it using this web page.  For today, that would be $1.6728 (NYMEX) + (-$0.0563) (Chicago adjustment) = $1.6165.

2.  Get the ethanol price, and then mix 90% CBOB with 10% ethanol.  For today, that’s .90*($1.6165)+.10*(1.76) = $1.6309.

3.  Add in 18 cents per gallon for various transportation, storage, middlemen, and other markups. (That’s a reasonable guess, but the actual add-in could be different.) That gets us to about $1.81.

4.  Add in the Federal gas tax of 18.4 cents per gallon (which hasn’t changed since 1993).  Now we have about $1.99.

5.  Tack on 6% sales tax.  $2.11.

6.  Finally, add in the Michigan tax per gallon, which goes up to $0.263 on January 1.  So, about $2.37.

This is what I call the “0-cent margin price”, and when we are near that price, I’m prepared to predict a price hike.  In Michigan, prices are in the $2.20’s right now, so we are overdue.  (In nearby states, a hike late this week has already happened.)  From the 0-cent price, retailers add on an amount, which I think of as their profit per gallon, but that might not be the correct way to think about it.  Nevertheless, adding this number works!  We reverse-engineer this number from studying previous hikes, and currently it seems to be about 22 cents.  So, add that in to get the new price:  $2.59.

I was in Lansing this morning (running a 5K), and though most stations were $2.21 or so, I swear I saw a $2.59 at a BP near downtown.

So, I expect a rare Sunday price hike to $2.59.  Or maybe it will happen late today.  Or maybe they’ll wait until Monday morning.  Regardless, fill up this afternoon!

And Happy New Year! — Ed Aboufadel

Bonus:  Here’s what gas prices have looked like since 2000, from dshort.com:

gas-prices-since-2000

 

Time to wrap up 2015

Comment on my December 9 prediction:  A perfect CORRECT, as prices rose the next day to $1.99.  We saw another reset (sort of) to $1.99 at the beginning of this week.

Wednesday, December 30, 2015, 3:30PM:  Time to wrap up 2015.  My “home station” to track prices in the Speedway on Lake Michigan Drive & Collindale Avenue, and in the first half of 2015, prices crept up until we got to $2.99 on June 11 and again on July 1 and on August 12.  Then the bear market in energy really started to snarl, and we enjoyed falling prices the second half of the year.  Sample prices:  $2.24 on September 15, $2.17 on October 30, $1.99 on November 20, and our low of the year:  $1.78 on December 1.  Hard to complain about a 40% drop in retail prices in six months.

So, what to expect for 2016?  This article is helpful, particularly the “Cumulative Average YTD Change” chart.  It gives you a sense of what we’ve seen for years:  prices tend to rise until about Memorial Day, get more volatile through Labor Day, and then decline into some point in December.  Despite oil prices appearing to head to new lows this week, I suspect we’ll see the same trajectory in 2016, leading to prices typically over $2 come March or April.  Short term, though, there is no sign of a hike in the air.

Thank you to all our readers for checking in regularly.  We’ll keep playing The Gas Game in 2016, and you can find us on Facebook, Twitter, and on our web site.

Don’t Be Lulled

Comment on the October 25 prediction:  Prices fell all week, so pretty much CORRECT.  Then we got that hike yesterday.  Boooooo!

Comment on coining a term:  I liked ChrisDG74’s “Greed Grab” the most of the entries that were posted.  I may start using “Fat Fingered Greed Grab” for those twice-a-year faux hikes.

Sunday, November 1, 2015, 10:49 AM EST:  The problem with gas prices under $2.75 is that it is easy to get lulled into a sense of complacency.  Friday night, I updated my spreadsheet and saw that we had moved into price hike territory, but I thought “Eh, some time this weekend I’ll post something looking ahead to Monday.”  Of course, that was WRONG, because prices rose on Saturday morning to $2.49 here in Michigan.  It wasn’t a Fat Fingered Greed Grab, though, just the usual Grab.  Moving forward, we have two cross-currents from now until Christmas.  Historically, the next eight weeks are usually a time of declining gas prices.  But given the bounce off of the recent lows in the energy and stock markets, we may have more room to run higher there.  Maybe these two dynamics will cancel each other out, and we’ll average $2.39 from here to Christmas.  That’s not a prediction, though, just a thought. — Ed A.

Updated Refinery Status Page (yes, finally)

Howdy all, I’ve updated the refinery status page to reflect refineries that have changed hands and updated owner information, capacity, etc. I’ve also updated the status information based on the latest information known, and the icons of the refinery tell the story- red, yellow, or green. This can be found under FEATURES on the top menu bar, or I’ve embedded it below.

10 Years of The Gas Game

Wednesday, June 1, 2011, Noon:  Wow, what a hike to $4.19.  My crystal ball has been rather foggy the past two weeks, but my friends at GasBuddy.com sent out a timely warning last night, and Bill also had a posting yesterday.  Based on the way the market is acting so far today (lousy), maybe $4.19 won’t last.

Ten years ago today, on June 1, 2001, is when I stated my daily monitoring of gas prices and NYMEX prices.  By the end of 2001, I had figured out what I needed in order to start making predictions.  In June 2002, the “gas game” essay was published in the Grand Rapids Press, and on June 12, 2002, I started this blog with my first posting.  So, for the next twelve months, we will be celebrating “10 Years of the Gas Game”.  The gas price in Standale on June 1, 2001?  $1.75 a gallon. — Ed Aboufadel

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