Friday, August 22, 2003

In retrospect, yesterday’s price hike seems obvious when you look at what was going on in the futures market. Wholesale prices jumped 6 cents since the last price hike, and retail prices followed. There are indications that we have some serious supply problems right now, and it is not over yet. Yesterday also featured the largest jump in gasoline futures prices in one day in more than 5 years, according to a radio report. The August gasoline futures are out of control, so I am already predicting yet another price hike for next Wednesday, with the new price being an ugly $1.84, just in time for Labor Day. Turning to another matter, the front page of yesterday afternoon’s GR Press featured a rather useless story about “drivers fuming at the pumps.” If you follow my work, you’ll agree that the retailers are not gouging drivers — the problems are at the wholesale level. The retailers’ problem is that they can’t, or won’t, stick with steady margins, instead allowing them to range from 20 cents to below zero. Consequently, when they restore their margins, and as wholesale prices change, you get these 15 to 25 cent jumps, which is just bad public relations for the retail gasoline industry in Grand Rapids. The goal of “The Gas Game” is to catch the retailers when their margins are low. As long as they keep playing, so will I.

The best quote from the Press article was from Tim Sullivan: “We went into Iraq and took over the oil fields and we’ve got nothing to show for it. The prices should be coming down, but they keep going up.” Oh, my, a price hike on MONDAY, with a real ugly price of $1.88. I think I need to stop trying to pick the day and exact price of the price hike, since, in this case, my prediction was WRONG.

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