The good news is that Citgo is open again on Lake Michigan Drive, and competition has returned to Standale, with prices as low as $2.92 this morning. The bad news is that while prices have fallen below $3 a gallon pretty much everywhere in the area, wholesale prices jumped six cents yesterday. That is a recipe for a price hike, today or tomorrow, in the neighborhood of $3.09. Also, pay attention to the media buzz about Tropical Storm/Hurricane Chris, which will probably cause wholesale prices to rise. 3/4 CORRECT, 1/4 WRONG, as prices hiked on Thursday … to $3.19.
Wholesale prices rose slowly at the end of last week, indicating a 20-cent margin price (with HU/RB averaging) of $3.12. Although prices were below $3 in most places on Monday morning, given how slowly I thought retail prices were dropping over the weekend, and the slight lowering of tensions in the Middle East, I thought we’d get through Monday without a price hike, so I didn’t fill up this morning. (I was planning a “price hike on Tuesday” prediction.) But oil prices are up today, and the NYMEX price is up 3 cents, so Speedway has hiked to $3.19, grabbing a bit more margin that usual. We’ll see if the competition keeps them in check, but at least in Standale, I’ve been disappointed in Meijer’s competitive spirit since the Citgo closed.
An interesting and long article on the front page of Sunday’s GR Press about gas prices. Some of it fits my experience, but I don’t agree with the calculation about stations losing money. I’ve been doing the Gas Game publicly for four years, and I have heard from many dealers, but no one has ever said shipping and handling adds 18 cents to a gallon of gas. If you add that to my formula, then price hikes basically re-set the price so that the retailers are breaking even, and that doesn’t ring true with me. I have also been told that competition is not “dwindling” and is rather intense. By my estimation, break-even for the retailers is in the low $2.70s today, so we are setting up for a price hike to $2.89 or higher soon. The next day, prices rose to $2.89. Now that’s what I call CORRECT!
12:00PM: When I updated my spreadsheet this morning, I didn’t like what I was seeing, as wholesale prices had gone up sharply the last two days. I was going to post something about prices not going down this weekend, but had to run to a 3-hour meeting. By the time I got back, Speedway was showing $2.19, and I think the rest of the competition will follow. Darn.
1:45PM: I’ve been doing about as well as a coin flip since late August, when Hurricane Katrina blew through. So, I apologize for being WRONG half the time, although I’m losing the Gas Game, too. So, what’s going on here? Wholesale and retail prices have been dropping like a stone since the end of September. I’ve heard that retailers are selling below cost, but they are waiting for Speedway/Marathon to hike prices first. Then there’s something I theorized back in May that is starting to look like a new rule to follow: Retailers are very impatient during uptrends in wholesale prices, but during downtrends, they are in no hurry to do price hikes, even if it means selling below cost. If anything, it is a clearance sale of merchandise they paid too much for.With futures prices down another 5 cents today, the price cuts can continue around town. But all that can turn around at any time. So, no prediction right now, enjoy the cheaper gas, but keep vigilant for an always-possible price hike.
There was a price hike, sort of. Speedway reset to $2.29, but in some parts of town and in Allendale, they took it back right away because the competition didn’t match the new price.
There’s a real disconnect right now between gasoline futures prices on NYMEX and retail prices around the country, and retail prices could easily be 25 cents lower right now. That means either there still are supply bottlenecks leading to higher wholesale prices than are being captured in the futures market, or the retailers aren’t in any hurry to pass along new cuts in their wholesale price to consumers. The latter is why competition is always important! Contrary to what I posted on Monday, I can’t see how it is possible to hike prices for the rest of the week, and I am going to look for lower prices ($2.70 a gallon?) by the end of the weekend. CORRECT on that prediction, as prices slowly went down, getting to $2.73 in Standale on Sunday night, and $2.68 today.