Tag: profit

Prices fall as supply issues ease

I see the prices falling in the next couple days at least, since the Chicago spot has fallen 21 cents since Thursday.  The supply problem in the Midwest seems to be easing, and we have seen prices fall in some areas.  Since I have had a report that Indianapolis stations recorded a negative profit for the month of May (a time retailers are supposed to gouge people coming in for the Indy 500) it’s not likely we are going to see as fast a fall as you would hope, as stations will look to recoup their losses.

Keep an eye on what the Chicago spot is doing on our “Today in Oil” page.  As long as it continues to fall back toward the NYMEX RBOB, we too should see prices fall at the pump.

Let me reiterate my target again for May and June as prices climb to $2.29

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.

Patrick

Price jump soon (today?) to $2.19?

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!

Patrick

Something Different: Commodity-based ETFs

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.

30-cent Chicago Discount means you’re paying TOO MUCH!

A very unlikely situation (a good situation) has developed here in parts of the Midwest. I’ve noticed a trend that has resulted in much lower wholesale prices for the Chicago PAD District. Gasoline coming out of Chicago (which is most gasoline supplied to West Michigan), is currently DISCOUNTED nearly 30-cents from what it’s being traded at on the NYMEX. Chicago wholesale spot prices for regular unleaded are $0.9972 tonight $0.972 this morning! (Yes, that’s under a dollar before tax and transportation costs) This is a result of refiners trying to sell off their remaining stocks of Winter blend gasoline before they are required by law to start production of lower polluting Summer blend gasoline. This discount will only last until the Winter blend is gone… think of it as a clearance sale!

Speedway and friends, LOWER YOUR PRICES! You’re making a killing- why can’t you pass this savings on to your customers? I take aim at Speedway since they were the first to rise to $2.05.

To benchmark, last week we only saw a discount of 7 to 9-cents off NYMEX prices, which meant that the same gasoline Friday was bought for $1.25ish per gallon. Any station taking delivery any time soon will be absolutely awash in profit since this Chicago Discount has really kicked in this week.

I ask that stations pass the savings they are getting onto consumers, or hey, at least HALF?!

$1.9X prices are too high. Where is $1.75? Let’s go stations. Lower your prices! The first METRO GR  non-club station under $1.80 will get a THUMBS UP from me on this blog if it happens this week (lets see if anyone takes me up on that offer).

Patrick

 

Price restoration in Speedway States? 50/50 odds to $1.999

Not very solid on this folks, maybe 50/50, but I think we’re awfully close to a “price restoration” in Speedway States to maybe $1.999. Like I said, I don’t feel as confident on calling this hike as I have on others, but I think that some stations dropped prices following the markets closing price on Monday. However a poor DOE report reversed any loss in wholesale prices.

We’re also barely clinging to a “Chicago Discount”, which is just over a penny per gallon. Gasoline coming out of Chicago is actually the most expensive gasoline in the nation east of the Rockies at the moment, likely due to refinery issues here. We should see gasoline being diverted out of the South and East because of the conditions here. Refiners and wholesalers can fetch a few cents more per gallon here because of those conditions so I expect the Midwest to soon have higher supplies as everyone rushes to send us gasoline (and take advantage of a few extra pennies profit per gallon).

So- a hike tomorrow to $1.99? Not completely sure, but what’s better- gasoline for $1.88 or $1.99? I know gasoline won’t get much cheaper in the next few days… I took the risk and filled up tonight for $1.83 after discount. If I were you, I would too!

Patrick

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