Tag: fudge factor

Tuesday, October 25, 2005

1:30 PM: I predict a price hike on Wednesday or Thursday. We’ve seen prices fall dramatically this month, with the last hike being to $2.94 on September 30. Today, you can get a gallon in town for $2.37. This drop in retail prices has followed the drop in NYMEX prices, but retail prices have remained above the 20-cent margin price I calculate, reflecting a signifcant difference between New York and Chicago prices. I am not be able to tell what the “fudge factor” is right now, but based on the Department of Energy web pages that compare New York vs. Chicago wholesale prices, it is at least 8 cents. With NYMEX up today, the numbers are lining up for where a price hike could occur, so it probably will. My guess right now is a new price somewhere in the neighborhood of $2.49. I practice what I predict and filled up Thursday morning for $2.35. That was the WRONG thing to do, as prices got as low as $2.21 on Sunday after no price hike.

Friday, October 14, 2005

2:00 PM: NYMEX futures prices have fallen another 14 cents this week. Right now, that puts the 0-cent margin price at $2.19 and the 20-cent margin price at $2.41. However, we know that prices have been staying above the 20-cent margin price the past few weeks due to the “fudge factor” difference between New York and Chicago prices that is probably still due to hurricane damage. Nevertheless, prices will continue to fall, perhaps with some drama, this weekend and Monday, so don’t rush to fill up. Prices continued to fall, slowly but surely. The morning of 10/19, you could buy gas for $2.47. The prediction was essentially CORRECT.

Monday, September 26, 2005

Wrong predictions like last Monday’s require you to go back and look at your calculations. The problem the past several weeks has been the “fudge factor” that takes into account the difference between the NYMEX futures prices and the wholesale prices in western Michigan. When Katrina struck, the FF was at least +20 cents, which contributed to prices of $3.39. But based on Friday’s price hike, the FF is currently -15 cents. Before Katrina, the FF varied at most between -10 and 10 cents, so you can see how this is making predictions impossible. So, let me just share what I see right now: with NYMEX prices down to $2.00 a gallon today, the 0-cent margin price (with FF=0, like last autumn) is $2.53, and the 20-cent margin price is $2.74. As I drive around town, I’m going to this to help decide whether or not to fill up the next two days, but prices could fall to $2.39 again, or up to $2.79. Maybe the crystal ball will be clearer later this week. The crystal ball has been broken — price hikes on Wednesday and Friday? Rumors of wholesale prices above $3?

Monday, September 12, 2005

More good drops in gasoline prices on NYMEX should translate into lower prices over the next several days. Using this afternoon’s futures quote (approx. $1.85), and plugging into my formula (with a “fudge factor” of 0 cents), gives a 0-cent margin price of $2.37, and a 20-cent margin price of $2.59. So, c’mon retailers, let’s pick up the pace in passing those price drops along to us! (By the way, that’s a prediction!) Are there really stations still asking $2.99 this afternoon? We fell to $2.54 in Standale by Sunday evening, much lower than the $2.79+ we were seeing on Monday. CORRECT prediction.

Monday, September 5, 2005

It is Labor Day, and I am full of random thoughts. (1) Looks like Gov. Granholm was playing her own “gas game” with Marathon/Speedway, according to Saturday’s GR Press, as she commended “the state’s largest supplier of gasoline” for dropping prices to $2.99 a gallon on Friday. (2) They probably dropped the price because wholesale prices got back under control on Friday, with the futures losing at least 20 cents. Today you can buy gas in town for $2.88 a gallon! (3) Should I feel complimented or annoyed at the GR Press’ new feature on page 1: “The Gas Gauge”? (4) If the way the retailers calculate gas prices is returning to normal, and if there is no “fudge factor” adjustment to make because of shortages in the Michigan/Illinois region, then the 20-cent margin price this weekend on new shipments is $2.85 a gallon and the 0-cent margin price is $2.64. There’s been an adjustment of about 10 cents upwards the past three weeks, so figure that on Tuesday, the floor for prices is around $2.75. (5) I’m going to predict prices keep falling until Thursday, and then they get reset, and we start over again. These days, it is foolish to predict three days in advance, so I plan to post an update on Wednesday. Prices have been falling verrrry slowwwwly since Monday, so I don’t think the prediction is worth grading.

Wednesday, August 31, 2005

If the choice was paying $3 a gallon for gas or being a resident of New Orleans or Biloxi, I would choose the former.Now, what’s next for gas prices? The September gasoline futures contract, which expires today, went out of control yesterday, rising from $2.06 to $2.47 a gallon. I’m having a hard time believing this is a good approximation of wholesale prices. What I do in my calculations is average the current and next month contracts, and that gives us an estimate of $2.34 on wholesale prices, which corresponds to $3.10 for retail prices, with the 20-cent margin, but no fudge factor. Meanwhile, the government just announced that it is going to release oil from the U.S. Strategic Reserve, and there are reports on grandrapidsgasprices.com that Speedway just posted another price to $3.19. Right now, I can’t even guess what is going to happen five minutes from now.

And on Thursday, prices went up to $3.39, but not everyone matched that price hike.

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