Expected Price Calculation

The basic idea to make predictions is to develop an estimate for the retail price for which retailers are not making any profit.  In our postings, this is sometimes called the “0-cent margin price” or the “Spike Line price”.  As the retail price gets closer to this price, a reset of 15 cents or more becomes more likely.

To compute the price, we have to take into account an estimate for the wholesale price, a variety of taxes, and miscellaneous items (e.g., middlemen, freight, and storage fees).  Tax rates are set by the Federal government and state governments, and the miscellaneous items stay relatively stable.  So, the key number to focus on from day-to-day is the estimated wholesale price.

There are a number of ways to estimate the wholesale price.  One approach is to combine the RBOB quote with this RBOB/CBOB comparison quote.

The formulas for the current calculations can be found on our Spike Line page.

— Ed Aboufadel

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