Tag: rack prices

A spike on the horizon?

Chicago spot gasoline:
Chicago Spot: $1.78 UP 0.0978
Costs and taxes adjustment: 0.7772
Fair Price: 2.4082
Average Michigan selling price 2.3820
Margin over cost + profit: -0.0262

USA Average: $2.479
Michigan average ( $2.382 ) is $0.097 under USA average

A spike is looming, with a negative margin in my fair price formula. It’s quite possible that the run-up on the markets won’t transfer over to your local rack prices, but I’m 90% sure of a spike tomorrow.

Expect prices anywhere from $2.37-$2.42 in Indiana, 5 cents higher in Michigan, and with the Chicago RBOB only 1 cent over regular, it could be anywhere from 0-5 cents over the Indiana price.

Trading resumes on NYMEX for gasoline and oil. Prices dive!

EDIT: FOR LATEST UPDATES ON REFINERY DAMAGE/SHUTDOWNS, VISIT THE REFINERY STATUS PAGE

NYMEX opened today at 10:30am, a break from when the exchange usually opens in the evening for electronic/international trading.

At 2:00EDT, gasoline for October delivery was trading down 12-cents/gallon while oil fell below $100/bbl.

I am researching and making calls today for possible damage reports. So far, USMMS is reporting that two oil rigs are floating adrift in the Gulf. Let’s hope it doesn’t get too much worse.

The 12-cent loss is a welcome sign, but it may not make it to your local market. Rack prices is what determines your area’s prices. Hopefully this makes it to the Ferryburg, MI rack (where gas is pumped before it arrives in Grand Rapids stations)

First ever Saturday hike! Speedway to $4.19! $5 spotted in the South

EDIT: Speedway has just hiked for the first time EVER on a Saturday. They made the jump to $4.19!

TheGasGame has independently confirmed gas prices of $4.99 in areas of Tennessee (all over!), a few stations in North Carolina, and Kentucky. We’ve also confirmed prices of $4.69 in Virginia, North Carolina, and Georgia. Also prices of OVER $4.49 in South Carolina, Arkansas, Alabama, Virgina, Texas, Mississippi, Florida, and INDIANA. STAY TUNED.

According to a source familar with wholesale rack prices in Grand Rapids, he says prices that stations get charged went up last night. If the station purchases branded gasoline (such as Shell, BP, Mobil, etc) they price rose 18-cents per gallon. If the station buy unbranded gasoline (usually the cheaper stations) their price rose 25-cents per gallon.
This is a very odd situation. You’ll likely see stations that need more fuel try to raise prices leading to a large-scale, super UNORGANIZED price hike. Stations do not want to lose that much per gallon and will be forced to sell higher. Again, this could create an odd price hike situation.

We may see $4.19-$4.35 before the day is out, but we’ll see. This likely is happening all over the Midwest.

EDIT: Gas hike warning: $4.09+ in Michigan, Indiana, $3.99 in Ohio, Nationwide 10-30cents/gal

EDIT: 9:15pm EDT:
With the blog becoming the focus across the nation tonight, I am doing my part… or trying. Here’s what everyone can expect for tomorrow and the days ahead: Prices will likely rise for tomorrow in MOST areas. Here in the Midwest, we can expect at least 20-30cent differentials between now and tomorrow night. Some areas that are now paying less than $4/gal could see $4.35 or higher tomorrow. If you live in OH, PA, NY, WV, etc, you’ll be aided by East Coast refiners and pipelines that are doing well. Here’s a map. The more pink, the more of a jump you’ll see over the next week. The futher West the better. You’ll be away from pipeline issues and your crude oil will becoming in to a non-closed port like the oil for the Midwest. That also goes for those in the upper East Coast. However, EVERYONE will see prices rise.

We’ll likely see an increase at the pump tomorrow again… the main reason… IKE. He is shutting down one QUARTER of all United States gasoline production.

Hope that it doesn’t strengthen too much, and hope it goes more South!

Other than that, wholesale rack prices jumped 26-cents here tonight (the prices STATIONS pay).

You can bet tomorrow morning stations buying gas tonight will pass that price increase to you!

FILL UP NOW!

West Michigan’s higher prices justified, the pain will continue…

First off: Read this post thoroughly if you want to find out WHY prices are justified.

A brief thank you to Tom Kloza for taking the time out of his day (Publisher @ OPIS) to respond to a few questions I had.

I now understand and can say that I know why Grand Rapids (and all of Michigan) are suffering from higher gas prices than the national average (currently at $3.66/gal)

It all started back around August 11. Grand Rapids prices had been closer to the national average, and then suddenly on the 11th, the difference between NYMEX gasoline and our local rack prices started their disconnect.

Here’s an image (graph provided by GasBuddy, edited by me) to show you exactly what’s been going on:

If you notice, the disconnect is getting worse over time. On August 11, Grand Rapids was quite close to the national average. Around Aug. 15, we had a difference of about 15-cents. On Aug. 23, that shot to 19-cents. Then yesterday it jumped to 25-cents (more like 30-cents since all the stations reset at once here)

On the subject of this matter, people have been convinced we’re being gouged. At first it would appear so, and I was ready to believe it. In haste perhaps, some were even trying to tie the price of oil (same price months ago when gas was 60+ cents cheaper) to the price of gasoline. In my years of doing this, experience has taught me that oil and gasoline prices can never be tied together.

After receiving a response from Mr. Kloza telling me briefly about struggles with getting gasoline here, I went digging. The content below is what I found:

NEW YORK, Aug 11 Reuters – Gasoline differentials in the the Midwest and U.S. Gulf Coast were expected to continue climbing this week as refinery outages, tight inventories and low imports underpin values, dealers said. The latest in a slew of unplanned refinery upsets is a reduction of rates at Marathon’s 222,000 barrel per day Catlettsburg, Kentucky refinery after a crude oil pipeline rupture on Sunday, August 10.

Reduced rates at the refinery are expected to further boost already strong differentials for gasoline in the Midwest, adding to a decrease in gasoline supply in the region after last week’s an outage at Citgo Lemont’s FCC.

“The Magellan system inventories of gasoline have dropped 600,000 barrels since August 1st as new barrels were diverted the St. Louis and Chicago,” one Midwest broker said.

“At 18 days of supply coverage the system is not yet critically short gasoline… (Group Three) must compete for barrels against Chicago for these barrels, so more strength is likely.”

Gulf Coast gasoline differentials were also expected to be supported by a number of refinery upsets from last week.

Lyondell’s gasoline-making fluid catalytic cracking unit at it’s Houston, Texas refinery had an upset last week, and a company spokesman said the unit was still running, but did not specify if it is currently at full rates.

The restart of Citgo’s Corpus Christi, Texas refinery after a power outage last week is expected to last through Wednesday of this week, according to a filing with state regulators.

Gulf Coast gasoline differentials are expected to be further supported by sinking inventories of the motor fuel due to lower imports.

In the New York Harbor, values for conventional gasoline are generally seen tracking the Gulf. But the upside for reformulated gasoline may be capped due to higher inventories of the fuel due to weak blending economics.

After reading that, I found another news story dated more recently, September 5:

NEW YORK (Dow Jones)–U.S. refiners pushed gasoline output to record highs in the days before Hurricane Gustav shuttered operations along the key Gulf Coast.

Many plants are beginning to ramp up operations, but pre-storm oil
inventory data point to several areas of potential supply tightness far
from the Gulf region.

Late Friday, the federal Environmental Protection Agency issued waivers from clean fuel requirements for parts of Georgia, Alabama and North Carolina, and extended waivers in Louisiana until Sept. 15 to “allow for greater flexibility for the fuel distribution system to support an adequate supply of gasoline.” Lost refinery output last week alone could be on the order of 20 million barrels of gasoline and other products.

Power outages to plants and pipelines complicate the matter and spread the problem beyond the region. Midwest refiners – notwithstanding a surge to record-high gasoline output last week -face a supply shortfall as the Capline pipeline, the 1.2 million barrel-a-day main artery for crude supplies from the Gulf to the heartland, is only just resuming partial operations. The Colonial Pipeline from the Gulf to New Jersey, a crucial link for Northeast U.S. supplies, is running at reduced levels.

During September, shipments of gasoline on the vital carrier averaged 1.2 million barrels a day in the past five years, with distillate flows at around 625,000 barrels a day. At best,
refiners are likely to take at least a week to bring operations back, while offshore output will likely take twice as long to return to pre-storm levels, government officials estimate.

The big loss of refining capacity, relative to shut-in crude output, has helped sharp the steep falloff in prices begun when Hurricane Gustav was shown to be less destructive than Hurricane Katrina in August 2005.

Imports, especially of gasoline, are expected to flow heavily from Europe, where the fuel remains in surplus and the usual seasonal decline in demand may blunt the impact of supply losses. The end of August brings an end to the peak summer gasoline demand season, which was battered by high prices this year.

Michael McNamara, who compiles the SpendingPulse survey for MasterCard Advisors LLC, said U.S. gasoline sales between the end-May Memorial Day and Labor Day dropped 3.9% to around 9.4 million barrels a day, after a year-to-year rise in the peak period in
2007 of 2.4%.

Demand Down For 13th Month

EIA data for the four weeks to Aug. 29 show total U.S. oil demand down 733,000 barrels a day, or 3.5%, from a year ago, at 20.292 million barrels a day. That would be the lowest August demand since 2003 and mark the 13th straight year-to-year drop in monthly oil demand.

Preliminary data show January-August U.S. oil demand is down 847,000 barrels a day from a year ago, the biggest decline in the first eight months since 1981. At 19.9 million barrels a day, demand is the lowest in the period since 2001.

A pre-storm surge in gasoline output in the Midwest of 12.3% pushed regional output to a record 2.55 million barrels a day, and pushed nationwide output to a highest-ever weekly level of 9.422 million barrels a day. In an indicator that says more about sluggish demand than about refining capabilities, domestic output of gasoline
topped demand at the end of August for the first time on records dating back to 1991.

The last time domestic output topped demand in any week was in mid-January. Production exceeded demand by a slim 22,000 barrels a day in the latest week, while a year ago, demand outpaced production by 420,000 barrels a day in the last week in August.

Still, while margins favor a counter-season shift to gasoline output over distillate output, and refiners outside the Gulf Coast have some spare capacity, reliability of crude supplies from the region is vital.

Marathon wants to borrow crude oil from the Strategic Petroleum Reserve for running at two Midwest refineries, but the oil must be shipped through the still-limited Capline, which Shell said it hopes to have fully operational in the coming weekend. Valero said it cut runs at its Tennessee refinery.

Talks EIA warns that some local markets may face supply tightness and potential price jumps. But they won’t likely be enough to reverse the slide in prices in recent days, provided there isn’t any lasting damage to facilities.

Front-month crude has been the cheapest of all listed Nymex contracts in the past 10 days, a price curve that suggests weak near-term demand for crude and potential for a significant stock build, as refiners are rewarded for building inventories at relatively cheap prices now. But, at least in the U.S., Gustav is overriding, at least temporarily, those traditional moves.

So basically, on the 11th of August, a refinery went down due to a pipeline rupture. That pipeline may have well carried crude from the Gulf to the Midwest, so naturally when a pipeline goes out of service, oil delivery is effected. With less oil available to refine, supply takes over. Less supply means higher prices. Now we’re suffering from Gustav, which has also closed delivery of oil to some Midwest refiners. Can’t refine products means less supply, means higher prices. Since places outside the Midwest have alternative ways to get crude, their prices are lower because getting oil isn’t an issue like it is here.

A few words from Tom Kloza’s blog:

As I write this, the price of gasoline in the biggest global bulk market (the U.S. Gulf Coast) is trading for some 60cts gal or more above gasoline futures, or about $3.30 gal late Wednesday afternoon. It appears as though Ike has put some of the largest clusters of U.S. refining in jeopardy.

The last time we saw crude oil prices this cheap, the national average price for gasoline was about $3.25 gal. It’s about 40cts gal higher than that now, and I suspect we’ll see more increases in some markets by the weekend, even if Ike fizzles and cuts a path through rural less populated counties. Chicago is many states removed from Hurricane landfall, but even there, we’ve seen the impact of Gustav as well as the threat from Ike. Refiners have had less crude to run, and wholesale prices there have also moved into the $3.25 gal or higher neighborhood. This explains why some Midwestern towns saw some large retail increases even as network talking heads discussed plunging crude prices.

Most of the upwelling we’ve seen in fuel prices in September is related to Hurricane Gustav. It did not significantly damage refinery infrastructure but it did result in a drop in refinery output of nearly 2-million bbl per day last week (as measured by the Energy Information Administration or EIA today). Those kinks of lost daily output are now being felt in places like Kentucky, Tennessee, Illinois, and especially in states like Florida. Even California isn’t exempt — the state gets some of its very clean gasoline from refineries in the Canadian Maritimes and a key plant in the Virgin Islands. Fuel produced at those plants will probably be diverted to coastal states in the U.S. this month.

Even if Ike misses Texas refinery infrastructure, more kinks are coming, and Americans will inaccurately assume that they are being hosed. Capitalism is at work here – supply is threatened—and buyers outnumber sellers, for the moment.

Basically prices are higher because we’re battling other states to buy the same gasoline. The highest bidder wins because this is supply and demand!

Patrick

Speedway Effect

DISCLAIMER: When gasoline prices fall over an extended period of time (Mid September thru November 2008), and there aren’t RECENT PRICE HIKES, the Speedway Effect becomes irrelevant since it is based on prices on the wholesale market rising and falling. Without these price fluctuations, there is no dominance in any market. Studies have proven this.

Here, we’ll show you what having a “Speedway State” or Speedway controlled city can do to local gas prices. Much of this data is from Gas Buddy, and the station data is taken directly from Speedway.com.

First, lets run down how many stations Speedway owns in each state. You’ll eventually see that the more stations Speedway owns, the larger the price spikes are in their respective areas. Instead of having a “stable” market where prices rise following rack prices, they can climb upwards of 30 cents.

According to Speedway.com, Speedway operates the following number of stores in their respective states:
44 in West Virginia, 73 in Wisconsin, 96 in Illinois, 136 in Kentucky, 228 in Indiana, 300 in Michigan, and 443 in Ohio, Speedway’s “home state”. They had 217 “SuperAmerica” locations in Minnesota that have since been sold. This will be very important to show you what relation prices have where Speedway has more stations. The time period I’ll be using for each chart is one month, this helps you to see clearly.

So, according to the data, the states with the most stations would be (in order from highest to lower) 443, 300, and 228. We’ll take a look at the three top states just because of the concentrated amounts of stations in certain cities.

Comparing these three states together, you’ll notice a VERY similar pattern. High spikes, a drop in prices, then another spike:

Now lets compare three cities in those states that have high concentrations of Speedway stations. For this, we’ll use Grand Rapids, MI, Indianapolis, IN, and Columbus, OH.


See a pattern here? In states that Speedway own a large share of the market, prices are quite active. Now, lets put in two cities that have the least amount of Speedway stations to see if their price charts are similar. For this, we’ll use Charleston, West Virginia, and Milwaukee, Wisconsin, and compare it to Cincinnati, Ohio:


As you can easily see, the lines are much different. The cities where Speedway doesn’t have as many stations are typically much less active- gas prices don’t take as big of a “roller coaster ride” as they do where Speedway dominates the market.

Again, lets do the same demonstration with two states that don’t have as many Speedway stations. Lets use Illinois and Wisconsin and benchmark it against Speedway dominated Michigan:

Notice the green line (representing Michigan) is like a roller coaster compared to the red and blue lines representing Illinois and Wisconsin, respectively. The blue and red lines are much smoother, meaning those states have slow gradual price hikes instead of a price “spike”.

The question is… would you rather have a gradual price increase or a sudden spike? If you want a gradual climb, then you should let Speedway know you’re sick of their price hike strategy!

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