Tuesday, February 22, 2005

Readers of my postings know I have argued strongly against the idea that large gasoline retailers use low prices to drive out competition. My primary example has been Speedway, a large gasoline retailer, who typical takes the lead on price hike days. So, the report in this weekend’s GR Press about the gas price war in Fremont caught my attention. According to this report, Wal-Mart was selling gas this past Friday at $1.64 a gallon (compare to $2.03 in Grand Rapids), definitely below cost, and the other retailers in town, including Speedway, have had to compete. Also, it seems that the past few price hikes in Grand Rapids have not been matched by all retailers, leading to significant price differences in town. I am beginning to suspect that the next several weeks will be volatile (both up and down) when it comes to gas prices. As for this week, I can buy gas in Standale for $1.91 and CNBC has oil prices up more than a buck this morning. This means wholesale gas prices will be up 3 to 5 cents today, leading to a 20-cent margin price of about $2.07, and I predict that will be the new price on Thursday (plus or minus a few cents, and maybe Wednesday, but never Friday). $2.07 was the new price on Wednesday in most places, Thursday for some — CORRECT!