Tuesday, May 26, 2009, 1:55 PM: Woe to us. Prices rose at random places on SATURDAY to $2.59, and today Speedway is making sure we understand with a system-wide re-set. The new price in Michigan is $2.69 a gallon. There are two separate issues here: one is the relentless climb since April 27 (when gas was $1.99 a gallon). The other is what happened this weekend.
The relentless climb could be just a delayed seasonal effect, as we get these moves every year in March and April, often related to the switch to summer blend gasoline. I think, though, that after the stock market recovered from that scary low in early March, the speculators are looking to make money again and driving up wholesale energy prices is a way to do it. I have some confidence in this observation because it isn’t that retail demand for gasoline is on the rise, and gold prices have been climbing lately, too.
As for this weekend, there are some goofy things going on in Chicago. I learned this morning that wholesale prices went up a lot on Friday in Chicago and that’s what caused the hike to $2.69. Now, this morning, they’ve dropped almost a dime a gallon, and maybe, just maybe, we’ll see that in our retail prices by Wednesday. That’s a wish, not a prediction.
TheGasGame.com was started officially back in 2006, but has roots going back many more years. Ed and I started posting together here at TheGasGame after we found out about each other through GrandRapidsGasPrices.com, a GasBuddy.com site that tracks gas prices. Ed and I both had a hobby and fascination with gas prices and were posting information we hoped would help others save on gas. It’s the same reason GasBuddy.com and GrandRapidsGasPrices.com are successful- helping consumers find low gas prices. We had a mission of successfully predicting gas price hikes and have had a good accuracy rate.
A few years ago, I contacted GasBuddy about putting some charts, graphs, and other information on the site and was allowed to do so with their blessing. My interest evolved and I started the blog here with Ed thanks to GasBuddy. Time has gone by and prices have become even more unstable it seems.
This past fall and winter, the folks at GasBuddy contacted me to see if we couldn’t pool our thoughts, ideas, and passion- to help consumers find low prices and to help them understand the fluctuations in prices. As a result of those conversations, I was offered a position at GasBuddy, an offer I accepted. Beginning yesterday I am now the Lead Petroleum Analyst with GasBuddy. I am working on doing much of what I did here at TheGasGame at GasBuddy.
We’ve started some new avenues to get information out fast, such as the GasBuddy Twitter Account (follow our updates!) and a Facebook presence. These are tools in fighting gas prices and SAVING MONEY! I’d rather save it and spend it on something a bit more enjoyable than pumping gasoline!
I will no longer be actively posting here, but Ed will remain here and he may have some announcements to make. TheGasGame.com will remain the same, but I will be posting on a larger scale for GasBuddy.
I’ll be sure to give more information or links when I start actively blogging with GasBuddy, but for now, check out those links. I wanted to thank every reader and fan for reading. I’ve been given a great opportunity to help even more people understand gas prices and to try and save money. Let’s do it!
Ouch! $2.29 across the Midwest with my benchmark station in Burns Harbor, Indiana skyrocketing overnight to $2.37/$2.49/$2.61! Wow! While the Midwest is suffering from regionally high gas prices, the higher prices should help funnel fuel from the South where refiners are thirsty for a better margin on fuel.
I hadn’t made it official on TheGasGame, but I had predicted on March 23 on GasBuddy that May/June would bring oil prices to $55-$65 and nationwide gasoline prices to $2.50.
This is my official target for the time being and I am working on a prediction for July/August at this time.
For the next few weeks, I see absolutely no reason for gas prices to rise over $2.50. The market is well supplied with oil and refiners are increasing their crack spread (profit) on making gasoline.
Hold in there folks. We should see a slower rise than we’ve seen the last week.
Looking at morning numbers briefly this morning before an interview on WOOD AM1300, I think I might have to announce that I’m expecting a price hike soon to $2.19! A quick look at closing prices on the market from late last week and yesterday:
Thursday close $1.42
Friday close $1.47
Monday close $1.54
As you can see, wholesale prices are up a whopping 12-cents since just Thursday! While I believe Speedway’s price hike Friday to $2.15 was over done to provide more profit for their Saturday/Sunday Speedy Rewards discount, I now believe that they will raise prices again to keep up with wholesale cost.
Another contributing factor is the switchover to Summer blended gasoline which costs more to make. Refiners were required starting Friday (May 1) to only sell Summer blended fuel after that time. Retailers have until June 1 to make sure they have it in their tanks.
At last check, the Chicago market is suffering a huge Chicago Premium for RBOB gasoline (ethanol blended gasoline, which nearly all retailers sell). The Chicago region was paying nearly 18-cents more per gallon than any other region. Chicago is currently trading RBOB Unleaded at a 21-cent PER GALLON premium to NYMEX pricing.
I’m led to believe we’ll see a jump to between $2.15-$2.25. I’ll pick $2.19.
Gasoline demand is starting to rise so don’t think this is a shock to see higher gas prices. At least we’re not paying $3 or $4/gallon!
In this post, I am going to address a different topic related to speculating about gas prices: Commodity-based ETF’s. Early this year, I was posting about the US Gasoline Fund ETF (ticker symbol: UGA). If you have a strong opinion about gas prices, you could use this ETF to make money. Except there are some unexpected tax consequences that I learned about recently due to a short-term “investment” of mine in an agricultural ETF called DBA.
Commodity and currency ETF’s make or lose money by investing in contracts (such as the NYMEX gasoline contracts). They are treated as “pass through” corporations meaning that the expenses and profits of the corporation are passed on to the owners for tax purposes. So, instead of the ETF paying income tax on its profits in these contracts, if you own some ETF shares, you do! At the end of the year, you get a K1 form that says, “Your share of the profits this year is $600.” You have to fill out an extra tax form for this and declare it as income. If the ETF lost money, then you get a write-off you can use. This is all independent of the price of the ETF or any dividend payments.
Regular stocks don’t work this way. If you buy shares in IBM, then IBM deals with these types of profits and losses, and you only have to worry about how the price per share has varied, and dividends.
For me, the upshot is that as much as I might want to buy UGA each December and hold it until August, I don’t want to deal with all of nonsense that goes with it. But looking back over the decade, that has been a good trade most years.
Disclaimer: None of this should be considered tax advice. I don’t have any financial interest (long or short or anything else) in UGA.
Perhaps to counter the negative sentiment as they shift to a new rewards program schedule, Speedway has announced in an e-mail that they’re “rolling back the pump price” for Speedy Rewards members on Saturday or Sunday (May 2 and 3). The offer ONLY applies to gasoline, and is not valid in Wisconsin or West Virginia.
You MUST bring your card, either the key size card or the full card. Swipe the card at the pump and receive 3-cents off per gallon! This is almost as good as their 5-cent discount when they initially came out with the Rewards system.
There is a disclaimer to this offer.
While it won’t counter their terrible changes to the reward system, it will be a nice way to part with Speedway… a “going away” party if you will.
Take it while it lasts and fill up the gas cans for the summer!