Tuesday, February 17, 2004

Last Thursday, we saw the another situation where many stations, led by Speedway, raised their prices to $1.76, while others only went up to $1.69. In fact, as of yesterday, prices were back below $1.70 on Lake Michigan Drive. So what’s going on here? When I started studying the situation a few years ago, I used some algebra to conclude that the purpose of a price hike was to get the gas stations’ margins back to 20 cents. My theory is that some stations figure it is about time to get that margin up to 25 cents, but some competitors aren’t going along. So, I expect this tug of war will continue for a while until either the 25-cent margin sticks, or Speedway and friends give up. As for this week, future prices took another jump on Friday, making the 20-cent margin price $1.75. So, the ingredients are there to raise prices to as much as $1.80 on Thursday. That’s my prediction. And, if it happens, then you’ll understandably start hearing the howls in the GR Press. That prediction was CORRECT, as prices rose to $1.79. Then, in a rush on Tuesday, I posted a prediction on GrandRapidsGasPrices.com that there would be no price hike during the last week of February. That was dead WRONG as prices rose (again) to $1.79 on February 26, and I am stuck with less than half a tank.