Wednesday, February 26, 2014, 6:30PM: Although I am still perplexed about what happened last week, I have some clarity about what will happen tomorrow. Last Thursday, on Grand Rapids Gas Buddy, there were postings of several stations at a new price of $3.65. Then, a few hours later, those postings were gone. Instead, on Saturday morning, we got our third Saturday hike in a row, and of course the new price was … $3.65. Retail prices have been following higher wholesale prices, which we usually see in February, particularly in regions influenced by Chicago. Well, we have a new high for 2014 in wholesale prices tonight, and I calculate the cost to retailers to be $3.59 a gallon. Since prices in and near Grand Rapids are in the $3.44-$3.65 range, we are looking at price hike on Thursday. Estimated new price: $3.75. –Ed A.
$3.75 in Indy. *sigh*
We’re still tracking a little bit lower than a year ago, at least.
This is my kind of “spike”. Speedway goes from $3.64 to $3.75 while the Pilot stations next door go from $3.64 to $3.59. The Speedy boys then dropped back to $3.64, then dropped again to $3.59….all in a few hours.
Have I mentioned I love “reverse” spikes LOL.
Price hike to $3.79 this afternoon in GR according to Gas Buddy!
Of course we’re “tracking lower this year compared to last”. Last year we were the lucky recipients of the Golden Squirrel award, paying $3.75+ all the way from Jan to July (spiking into $4.10+ territory towards the tail end) all while crude was in the mid 90’s.
We enjoyed a month of ‘relief’ and then crude started its climb again averaging $108 a gallon for a couple months, during which time we never went much above $3.65. Now with oil nearly $5 less per barrel and no refinery “resets” we’re told $3.75 is a “good price”.
http://www.IndyGasPrices.com/retail_price_chart.aspx?city1=Indy&city2=USA Average&city3=&crude=y&tme=18&units=us
It’s interesting how you put “good price” in quotes. Who said those words? If nobody, who even implied them?
Just curious.
The exact quote was “We’re still tracking a little bit lower than a year ago, at least”. To me, this appears you’re finding our current prices reasonable. Until the next squirrel takes out Whiting, of course.
Not an unreasonable position from someone who truly believes the free market is responsible for spikes, etc.
Wow, no, you seriously missed what I was trying to say. If I wanted to say prices were reasonable, I’d just say it. I don’t speak in code.
I’ve said repeatedly that I hate how high gas prices are. I just think the anger and the blame is misplaced on various corporate bogeymen by you and a couple others. I’m very clear and up-front about what I really mean.
So, yes, your “position” on what you thought I said was entirely unreasonable.
I’ll thank you to let my words stand on their own, without your imagination twisting them into something completely unrecognizable to me. Deal?
And a free tip: You can’t “quote” somebody by using words they didn’t actually say. I’m sure you wouldn’t appreciate somebody doing that to you…
“I just think the anger and the blame is misplaced on various corporate bogeymen by you and a couple others. ”
Ren, there’s no anger or blame here by me. All I do is state facts and charts, which of course have not been responded to.
I do not believe I stated anger or blame when I refuted your claim that we’re paying less for gasoline than the average. I showed you that 20 out of 30 periods we were higher, often by quite a bit, than the price of another state with the same gas tax we do and no Sp**dway, while the 10 periods we were lower we were by a trifle.
Nor did I expressed anger and blame when I pointed out that we got taken last year Jan-July, or that our current prices are higher even if crude is lower.
All the data in both cases came from the charts. I did not create those charts, all I did was interpret the results.
It’s also a fact that only a handful of states have such pricing, and also a fact that a certain company has 60% or more control of retail in all these states. And also a fact that with the rampant speculation and defacto oligopoly of the oil supply chain, market forces have left the building a long time ago.
It’s also a fact that in less than three months we went from an average of $3.13 and $94 crude to $3.70 and $101 crude. That’s a 15% price hike for gasoline vs 7% hike in crude, and no disruptions in supplies.
There’s a difference between stating facts and blaming others. Personally I make enough money and use little gas so let it go to $4-$5 for all I care, but this country won’t survive on $4-$5 gas.
I admire your dedication to facts, but your interpretations of the facts are disputable.
Anyway, this price hike, repeated every spring, is largely result of the government-mandated switchover to summer blends over the next two months. It’s not required in every region, so some regions have higher increases than others.
http://www.jsonline.com/business/higher-crude-prices-summer-blend-conversion-drive-gas-prices-up-b99217106z1-248217801.html
Once again, thanks, government!
I do not dispute legitimate business reasons exist for price increases. I do question the magnitude and duration of price increases, or the frequency of ‘resets’ and other refinery issues that pop in on a regular basis. Of course, we all remember how Whiting was going to be the solution to our gasoline supply problems, by putting all of our eggs into one huge basket. That really worked well 🙂 too.
If you believe the EPA, incidentally, Indiana does not require reformulated gas except a couple counties.
http://www.epa.gov/otaq/fuels/gasolinefuels/rfg/areas.htm
The switch to reformulated gasoline is only part of the problem. Ever since the media outlets declared gas prices may rise because of it there seems to have been a green light to up the ante on the Chicago spot market. It becomes a bidding war on what might happen; the turmoil in the Ukraine MIGHT cause supply disruptions of crude, the newest tropical storm MIGHT cause oil platforms in the Caribbean to close, a refinery fire MIGHT result in tight supplies of gasoline… Welcome to the new normal. Cincinnati’s gas prices are trending 8 cents over the national average…or maybe it is 2 cents over.
“Cincinnati’s gas prices are trending 8 cents over the national average…or maybe it is 2 cents over”
Cheap gas there then. $0.25+ over here in South Bend
“If you believe the EPA, incidentally, Indiana does not require reformulated gas except a couple counties.”
Understood, but the refineries that supply Indiana and the rest of the Midwest have to retool for the other formulas anyway. It disrupts refinery production and the distribution throughout the region. Instead of producing a couple fuels and sending them everywhere, they now have to produce an array of fuels and send each of them to specific locations. And, as my link points out, it’s not as easy as simply flipping a switch.
Turbo, I agree with your interpretation of the data, given the graph analysis I have done on Gas Buddy. Very seldom does our region get a better price. And if it does, it is only at the very bottom of the swings in pricing. People do get tired of chasing the dips, and Speedway knows that. Personally, everyone I know HATES this pricing scheme, and most people simply ignore it. I don’t, but it is tiresome since I have been doing it since Bonded and Checker was doing it back in the mid and late 1970’s.
….And another thing. Look at it this way, a distinct possibility…. If people are topping off their tanks often in an attempt to NEVER pay the highest price, there is more likely hood of some of those people coming inside and making purchases. Increasing traffic at a retail location is never a bad thing.
I am an engineer by trade, with four engineering degrees in several different engineering disciplines, and for the life of me, I do not understand how BP can spend $3-4B on Whiting and not be able to switch reformulation “with a flip of the switch” or “require extensive annual maintenance”… Or, why nobody does the obvious, that is, boutique blend refineries to supply only places that need it versus big refineries that supply everyone else. Or, why such annual hikes do not happen to OTHER places that have to deal with reformulated gas. Houston would be a good example…
Keep in mind it took many of my fellow engineers a decade to admit the Thursday dime increase was really happening, and many of them, with no allegiance to Speedway, will swear that the market forces truly drive the price of gasoline.
The role of the press cannot be ignored, and naturally the ‘market forces’ (read, the speculators who really run up gas prices) cheerfully oblige. One only has to look at the effort undertaken to convince the people that we should actually allow crude exports. The law currently bans exporting crude.
Not to be underdone, of course, several companies are setting up “pre-processing” plants built at little cost that “process” crude enough to get around federal law and allow export.
If you really have time to waste, read up California energy price breakdowns (official state numbers that report gasoline cost broken down by cost of crude, refining, and distribution/marketing). The charts show hilarious price swings beyond any credibility (i.e. one week it takes a quarter a gallon to refine gasoline and a week or two later triple that). Likewise distribution and marketing costs have hilarious swings of similar magnitude. The most startling discovery was how those numbers played out in the era of $148 crude, and sure enough, during $148 crude, refineries were working literally for free and gas stations never made a dime too.
Back to a routine Saturday hike in NE Illinois (4 of the last 5)
Failed Hike attempt by Greedway Thursday. Today most stations have retreated back to prehike territory.
Everyone on NW side of Indy/Carmel is at 3.75 maybe 3.69… Doesn’t look that failed to me.
But the Lawrence area still has a price war in the lower $3.40s, including a Speedway at $3.41.
Love that kind of competition!
Fort Wayne hanging in there at $3.67 to $3.75, that doesn’t look like much of a retreat to me, either, not after 4 days.
I see NW Indy prices as low as $3.62.
It’s really easy to see where Speedway has competition. It equals significantly lower prices.
I-75 at CinDay Rd exit(no competition) $3.649.
ONE exit up at Tylersville Rd(Meijer and Sunoco across the street) $3.369.
Lots of resistane in sw Ohio to this spike. Prices for the most part in the 3.30s and 3.40s.
“Love that kind of competition!”
You mean, Zone Pricing…
There’s tons of gas stations around North Michigan road in Indy/Carmel and they’re all at 3.69-3.75 as we speak. There’s lots of stations on the North East side of Indy and lots of them are in the 3.40’s. Maybe the east siders are by nature more competitive 🙂 ???
I used to monitor the gas price map and for some reason for a long time Tipton had really low prices and Kokomo high prices. now they’re reversed. From what the map shows, at least, Kokomo often has lower prices than Sams and Costco, but also they’re the ones to spike first. Competition?
Competition does exist – when Speedway renovated their store on Range Line they had a price war for weeks with the surrounding area, missing a couple of price spikes altogether, but that’s not common around here.
Of course, I’m sure some people will have better explanation for why this happens, so I can bring my favorite example of zone pricing. I consume lots of flavored coffee cream. For a couple years the Carmel Meijer store was higher than the surrounding Meijer stores for the identical product (and some others, but not for everything else). I brought it to the attention of Meijer HQ and quietly they lowered the price in Carmel to match the others. I have also seen similar prices in baby formula and diapers, much higher at Target stores in less, ehem, financially happy places than in Carmel. Again, just a few things, not everything. Make of it what you wish, but it would take a serious economic white paper to convince me that zone pricing in gasoline is not real.
Some states have laws against it (yea right) and others have looked into it.
@Chris: Yep, whenever competition is involved, the customer benefits. Regardless of whether Speedway is involved.
http://www.ftwaynegasprices.com/retail_price_chart.aspx?city1=USA%20Average&city2=&city3=FtWayne&crude=n&tme=3&units=us
In the last 3 months, there have been very few days one (people in Fort Wayne) could have beaten the national average.
Save for a 2-week period, the same can be said of Cincinnati
http://www.ftwaynegasprices.com/retail_price_chart.aspx?city1=USA%20Average&city2=&city3=FtWayne&crude=n&tme=3&units=us
Oops. Copied the wrong link, but for most of mid Jan thru early Feb Cincy was below the national avg. The rest of the time: above.
Yeah, the Midwest has been tracking above the national average for most of the last month. That’s certainly different from last August-December, when the Midwest was BELOW the national average about 80% of the time.
I guess you gotta take the bad with the good in the longer term. Sucks right now though.
http://www.FtWayneGasPrices.com/retail_price_chart.aspx?city1=USA Average&city2=FtWayne&city3=Cincy&crude=n&tme=3&units=us
And Chris…..Cinci still did better than Fort Wayne. It all boils down to You Just GOTTA BUY on the lows and ride out the highs. Something I have been doing since the late 70’s. It gets tiring, tho. It also helps to belong to Ricker’s Auto Debit system. Always 10¢ or more a gallon off of their already competitive pricing. And their stores and gas are clean.
Sorry, things just won’t work on a link as long as it needs to be.
$3.859 in West Michigan today….
Memo price set at $3.75 in Cincinnati this morning. Chicago spot is 1.2 cents higher than on the eve of loast weeks $3.69 spike that was largely unsuccessful. The majority of GREEDways in Cincinnati spiked within the hour so this looks like a fast rolling spike here.
Yep. $3.759 spike in sw Ohio today. Guess last week’s miserable failure of a spike attempt hasn’t deterred them. They’re spiking even HIGHER. Filled up for 3.38 this morning. In your face, Speedway.
-Greedway in east central Indiana UP from $3.58 to $3.79
-Pilot Stations next door DOWN to $3.53, was $3.58
-Marathon station a few miles away in Anderson DOWN to $3.58, was $3.69
Looks like Greedway is showing their true colors once again
Kalamazoo area 3.85
Thought were were still good today and was planning a posting this evening with a possible hike. I’ll have to look over my calculations, as $3.85 sounds high.
“Looks like Greedway is showing their true colors once again.”
You mean, not continuing to take a 2-4 cent loss on gas, as Ed’s Tuesday numbers showed?
Trying not to lose money. Sounds like pretty normal colors to me…
Ok, a few things to address:
TURBO:
“Indiana does not require reformulated gas except a few counties”
CORRECT. But that’s a special blend of summer gasoline. BUT… you’re half wrong. The rest of the state DOES transition from 15.0RVP winter gasoline to an eventual 9.0RVP standard. I still call that the transition to summer gasoline. The special gasoline “RFG” is the summer gasoline in some areas, whereas the lower 9.0RVP summer gasoline in other areas. We simplify this when talking about it, EVERYONE burns something different in summer vs. winter. Not just NW Indiana/Chicago/St. Louis/RFG areas. NOTE: RVP list is better than RFG “map” http://www.epa.gov/otaq/fuels/gasolinefuels/volatility/standards.htm
TimmP: “Very seldom does our region get a better price”. MOSTLY TRUE. Why? Well for one, the region’s largest refinery has been under the knife the last 8 years. Any refinery problem has been magnified because the Goliath refinery has been partially offline. We’ve seen some periods below the national average: http://charts.gasbuddy.com/ch.gaschart?Country=Canada&Crude=f&Period=24&Areas=Indiana,USA%20Average,&Unit=US%20$/G
TURBO: “I do not understand how BP can spend $3-4B on Whiting and not be able to switch reformulation “with a flip of the switch” or “require extensive annual maintenance”” let me address that. First off, it’s a slow transition- I mentioned RVP above. The transition is because of how the system works. Pipelines, station tanks, etc. Winter gasoline is 15.0RVP. Then in late Jan we transition to 13.5RVP. Then to 11RVP in March. Then to 9.0RVP in April/May. Then some areas go lower, to 7.0 or 7.8RVP in the same timeframe. Cali even goes to 5.99RVP! It’s a deliberate slow move as refineries get rid of varying RVP gasoline. Yes, its complicated. Also, they don’t NEED to do maintenance, so the switchover doesn’t require that, but they do maintenance generally during two times of year- late winter/late fall. Why? Demand is weak. Best time, lowest hit to margins. You want a pipe or sensor or cat cracker to fail mid summer and have prices soar? Neither does BP, or Exxon, or anyone for that matter, so they get their plants ready now. As for refineries producing boutique blends, most refineries make many products. BP Whiting likely has many options: RFG, 7.0RVP, 7.8RVP, 9.0RVP. I know of no refinery that simply runs one blanket RVP/specification. As for other areas that don’e see annual hikes, I don’t know where you’ve been hiding. It takes place country wide. Maybe not to the degree of Great Lakes, but see above comments on Whiting construction. The Great Lakes has definitely been impacted for the duration of that modernization.
Any other questions?
Thanks, Patrick. It’s always good to get the “expert” view on this. I don’t know if you consider yourself an expert, but you obviously have more insight into the facts than the rest of us.
Exxon Joliet is having issues as well.
“Timm, you’re still missing something. If you smooth out Indiana’s variations, the average price falls pretty much in line with the US average. That means every cycle has a trough during which time our average price is BELOW the US average. Most of you are so upset about the spikes that you miss or ignore the benefits of the troughs!”
I agree with this very much. Who’s to say that without the spikes that your average wouldn’t be higher?
Speaking of RFG maps, I like Exxon’s:
http://www.exxon.com/usa-english/gfm/files/us_gasoline_map.pdf
Patrick, thank you for the response. I suppose it’s too much to expect that a 3-4 billion dollar refinery could actually do what a car assembly plant costing a tenth of that do, that is, assemble ANY car the manufacturer sells worldwide, with zero cost or downtime to retool.
I do not question the need for changeover, or the need for maintenance, but I do question the fact that despite having lots of refineries, we in the Midwest (euphemism for Speedway) seem to be impacted more and for longer than everyone else.
It all boils down to the perceived credibility of the oil industry. Here we are, after 20+ years of spikes, and nobody has figured out WHY the spikes occur, let alone whether and how Speedway actually profits from them.
At some point, either someone who cares will look into what’s going on, or, more likely, greed will overcome us like in 2007 and we’ll have the economy crash once again. With trivial growth the economy is a zero sum game so the extra 20-30 dollars a month most of us save by buying low is not an issue for now, but as spikes get more frequent and more violent then spikes will have more of an impact, and it won’t be pretty.
The $3.759 spike rolled through Cincinnati swiftly. If you are lucky there are still a few straggler stations that haven’t changed but the options are few and far between right now.
Six years into this new way to buy gasoline it still confounds me. I never saw spikes like this when Standard of Ohio was a kingpin of this area so many years ago. I never saw spikes like this before 2007 either. Even the most diehard oil people have to admit to a little understanding of why the public can be skeptical. The bill for a fillup for the most recent spike price over earlier in the winter is nearly a $10/fillup increase. Suddenly a gasoline fillup for gas 160 miles away from me at Corbin, Kentucky outside of Speedway territory isn’t quite as impractical as it once was.
As far as comparing gasoline to a shirt which was an analogy a few weeks back, that argument doesn’t fly. I find a shirt I like and it is the non-sale price of $50 instead of the sale price of $30, I have many options. I can wait for another sale. I can go to Target or Marshalls for a less expensive alternative, I can even go to a yard sale or Goodwill and buy a shirt for 10 cents on a dollar. Once you miss the boat and a gas spike sets the price around you are committed to the higher price. There are no Targets or Goodwills for a better alternative for gas. And if the price of your shirt has a little spike if its own it will not affect the price of eggs or shampoo or 2 x 4s. If grocery and department stores see an increase of their transportation costs you can be sure the price of goods will increase as well.
I can afford the price of gas whether it is $1.50 or $4.25 but I am nearing the psychological threshhold where if gas is too high we will stay home with the exception of going to church. I have done it before and seriously it is a bad time for prices to rise because there is much to do at home like yard work out the wazoo, gardening prep, windows, ect…
“I suppose it’s too much to expect that a 3-4 billion dollar refinery could actually do what a car assembly plant costing a tenth of that do, that is, assemble ANY car the manufacturer sells worldwide, with zero cost or downtime to retool.”
Okay, but that’s going to cost them money — which means it’s going to cost you money too. There goes all the potential savings from a quick switchover…
“Here we are, after 20+ years of spikes, and nobody has figured out WHY the spikes occur…”
What? Really? Seems like this very web site explains it:
1.) Profit margin becomes razor thin or negative.
2.) Spike occurs.
Seems pretty clear to me.
Ren- Sure thing. I don’t know that anyone can be an expert, quite frankly, the oil industry is extremely far reaching and segmented. There’s so many topics- refineries, oil, ethanol, laws, taxes, pipelines, retail, markets, etc… Generally there are experts in one or a few of those, but not all of them, just due to the time involved in keeping up with all the red tape, policies, ongoings, etc.
Tuebor- Exxon Joliet is nortorious for issues, as is Phillips 66 in Wood River (ditto with Citgo Lemont). Each time I hear an issue at those facilities I shake my head. Sometimes I wonder if they need more oversight because of the amount of issues, or a more extensive upgrade.
EVERYONE- as much as I hate spikes, no where else in the country can you have a chance to buy gasoline when the margin is 0 or even negative, unless there’s a price war. NO WHERE. These cycles are GREAT if you can BEAT them at their game! If you can’t then yes, its lousy! Liquidity is better than prices that never give you the chance to get gasoline AT cost.
Turbo- Actually Turbo, every year car plants do shut down to retool for new models. Ford is shutting down a plant in Dearborn for 13 weeks! Much longer than a refinery typically does. http://www.equipmentworld.com/ford-will-shutdown-its-truck-plants-for-13-weeks-in-order-to-retool-for-assembly-of-2015-f-150/ with new models and enhancements there are faster shutdowns, but for new models and redesigns, you bet they close for a while. This is all normal. Also, in regards to seeming to be impacted more and for longer, again, I reference BP tainting this for the last 8 years. This year could be different. Chicago markets seem tighter than others yes, but a big part of your gut feeling is tied to the psyche of BP being partially down for the last 8 years in some form. That psyche is that with BP’s then 410,000bpd plant not having the capacity to make up for other refineries going down does play into fear, the Chicago market still has concerns about it’s biggest member having limited capacity to produce. Now with that construction done, we could see a different situation this year. ALSO- you don’t live in other regions to see what happens there and compare. IE- Los Angeles saw prices soar from $4.14 on Sept 20, 2012 to $4.69 on October 4, 2012. That’s INSANE. Then prices fell to $3.57 by Dec. 19, 2012, before rising again to $4.30 on Feb 15, 2013. All related to refineries. Minneapolis (Twin Cities) saw prices go from $3.42 on April 20, 2013 to $4.35 on May 17, 2013. It’s not always just us. Denver, CO saw prices of $2.75 on Jan 20, 2013 and rose to $3.54 on Feb 17, 2013. Hopefully that makes you feel better, or at least gives you perspective. In regards to why the spikes occur, I know why they do- it’s become obvious. I’d rather not fully lay it out here, but it’s their own decision to make as a company what strategy they have.
ALL: At the end of the day, I think it’s more on traders than oil companies, but whether those traders are big oil company traders, I don’t know. Just like day trading stocks which can influence stock prices, commodities can be day traded, and there’s a lot on the table with the U.S. consuming over 365 million gallons a day.
Becky_Gelke- The hikes have been growing in spike/per gallon, but not in percentage. Back in 2005, when prices were $1.90-$2.50, the hikes were 15-20c/gal, or 8-10%. Today they still hold that most times. The spikes have occured in varying fashion since 2001, according to the FTC. As for whatever shirt issue I missed, people fail to remember that gasoline demand is inelastic, unlike that shirt which demand is elastic, and is based on cost factors. Gasoline demand will always be there, yes, some will trim back their purchases when prices spike, but there’s always a need at some dollar amount.
I agree with Ren on his explanation for the spikes, that’s simplifying it.
I think the spikes at retail pumps happen because it increases the overall profit margin per gallon of gasoline for the retailers.
Business generally will not continue a practice unless it benefits the business in some way.
Oversimplified? …maybe.
I am fed up playing the game. I have reduced annual driving from ~12k miles in 2010 to >5k in 2013. I am on track to sell my motor vehicle over this summer season.
It’s nearly 36 hours post spike and the two Pilot stations closest to my house in east central Indiana have actually fallen 4 more cents to $3.49, while the Speedy boys continue to display $3.79. Hopefully Pilot wins the tug of war and forces em back down (I know Ren loves it when a spike is defeated LOL)
I’ve seen it happen a couple times in the past year where a hefty spike hits the area and the Pilots have refused to join the crowd. I have my fingers crossed this time as well.