Comment on the June 13 prediction: Yup, prices went back up to $3.99, as predicted. CORRECT.
Sunday, June 22, 2014, 8:45PM: The stocks/gasoline connection has been weaker for a while now. They used to move in tandem. Lately, we’ve seen the Dow and SP hit new all-time highs, but gas prices here in Michigan remain (barely) under $4. (All time high for gas in MI, according to my records: $4.29.) But the recent rally in stocks may have something to do with keeping wholesale gas prices (e.g. NYMEX) at about $3 and the price to retailers at about $3.70. With retail prices getting close to $3.70, I predict we are back to $3.99 soon, probably Tuesday, although it could happen Monday or Wednesday. All in time for the holiday weekend coming up! –Ed A.
A Marathon station near me jumped to $3.939 today. Not seeing a single Speedway station that’s spiked yet, though.
The Indy market average is actually below the national average, which hasn’t happened much in the last six months.
Some stations in the area are in the $3.40s.
Ren: I’d LOVE to see that 20¢ cheaper here in Fort Wayne. Best price is $3.65 and up around here.
That rogue BP dropped back down to 3.609.
Looks like Michigan is getting another day to fill up. Prices in Kalamazoo are $3.629–$3.759 this Tuesday morning.
$3.59 @ Cedar Meijer today + 5 cents off per gallon with Meijer Visa – yep, will be stopping tonight on my way home.
renbutler…
The Chicago spot prices is running 14 cents below the NYMEX RBOB futures, which is quite the reversal from late winter and spring. And it’s not always normal in early summer so count your relative blessings,
NW Indiana saw a spike to 3.99 (Porter and Lake Counties) and La Porte County saw a spike to 3.89. Not sure if the rest of Indiana will spike tomorrow. This spike was lead by Family Express, which has been the new normal this year for our areas.
We are good for another day in Michigan. I will be surprised if prices don’t go up tomorrow, Thursday.
Prices in Kalamazoo County today are $3.619–$3.759.
The lowest reported prices in Michigan are $3.479–$3.489 in Greenville, the west Michigan town that is home to the original Meijer store. That town has 2 Meijer and 2 Admiral stations and no Speedways.
3.899 in sw Ohio
3.95 Grand Rapids MI
3.95 Kazoo too
Indy escaped the usual late-morning spike period. Our average is still dropping and currently at $3.622, which is more than six cents below the national average. Almost everybody is $3.799 or less.
I guess I’ll have to wait until noon next time before declaring victory for the day.
I’m used to there being clear evidence of a reset by no later than 10:30 a.m.
Of course, I could still get tripped up if Speedway does one of the rare afternoon resets in the future.
Diether…
Maybe convoluted, but sometimes it seems lately Speedway dithers when they are on the fence for a hike until they see the spot market headed for a big drop and then they lock in extra profits with a hike. Chicago RBOB spot dropped a nickel today so wholesale should be down now.
Strange goings on in Cincinnati. No Gas Buddy email or website alert bar. There is a spike that started yesterday at $3.89 but I didn’t see one station at $3.89 on my way to work. Another strange thing. The Speedway in out Monfort Heights subdiviion that is usually the spike leader sits at $3.69 at the moment. This spike is gaining a little momentum but it is rolling through her very slowly. I hope it is a sign the spike will eventually fall apart.
Still no spike in Indy. Our average is down to $3.591 — that’s ten cents below the national average. There are even a couple stations in the $3.30s…
South Bend holding @ $3.58-$3.80 still. Avg 3.73.
Gas war at 1 corner were 3 stations are at $3.49.
Spike has been hit or miss here in sw Ohio. 1/2 mile from my house is 3.839. I can go 2 miles, either north or east, and it’s 3.579.
HOLING STEADY EAST CENTRAL OHIO, AROUND 3.53-3.59 LOCALLY. DEBATING FILLING UP TODAY OR WAITING UNTIL TOMORROW….NO SPIKES THAT I HAVE SEEN AND GAS BUDDY SHOWS NONE AROUND THE AREA AS WELL…YET?
Our high prices are attracting Gulf Coast gasoline:
http://www.platts.com/latest-news/shipping/houston/traders-watch-as-market-pries-open-arbitrage-21808602
Tuebor…
And those high prices are already tipping the supply and driving spot prices down this week.
The falling wholesale price has Speedway’s pricing strategy messed up. They had decided on a hike in Michigan early Wednesday but apparently not generally in Ohio or Indiana. When spot prices were plunging they went ahead with their spike Wednesday afternoon. Hopefully locking in extra profits. But the big drop in wholesale left them so high that a) apparently per other posts here in parts of MI the spike did not work well and b) They really were in no position for a spike Thursday/Friday in most of Indiana and Ohio. They’ll probably find a way next week though unless wholesale keeps steadily dropping.
I sure wish the gulf coast gasoline would permanently flow up this way then! This has to be one of the longest runs of 2014 with no spikes.
I say this now and Indiana will probably pay dearly with a 50 cent crank up next week. Oh well pump that gulf coast gas baby!
Just more evidence that basic market forces — supply and demand — are still working as intended.
Not quite. Working once and surprising everyone after we were paying a lot more than average for months is no sign of the “free markets working”.
If the free markets were working you’d see gulf refiners shipping gasoline north in sync with the spikes to take advantage of Speedway’s pricing practices, in recent years I’ve seen it happen maybe a hsndful of times and only after prolonged high prices in the area.
Tell us again how well the free markets are working after double spikes next week, one to 3.90 or so for Memorial Day and a smaller one to 4.09 or so after.
You’ll see your market forces right after I see the Easter Bunny working the Slurpee machine.
Distributing product isn’t as easy as flipping a switch. Of course they aren’t going to shift product from one region to another after every spike. It makes sense to do it only when they see a long-term trend that makes it worthwhile to change the flow.
That’s EXACTLY how market forces are supposed to work.
BTW, we finally had a great thread going, without all the “greed” and “squirrels” and tin-foil-hat nonsense. Why do we always need to resort to sarcasm and silliness?
Also, Memorial Day was last month…
We have had the long term situations where we were overpaying big time because of “supply issues” with our beloved refineries and guess what… Not a drop of cheaper oil came our way.
If it had been a single occurrence due to a squirrel I would say well too bad Midwest. But we have had spilled for decades and this attempt by Speedway to extend their margins had been noted for well over a year.
Tell you what. Let’s see if the long term pricing in the Midwest will be impacted. If it is we will be all happy to light a candle at the free markets’ temple.
I would not hold my breath, however. And, the corollary of accepting your statement that the free markets worked their magic is that for the last year or so we were being skewered by Speedway at the pump, just because their not so free market pricing drive us to the point of someone noticing and sending cheaper gas.
So much for cheaper gas east. Went from 3.57 to 3.79 today.
“…just because their not so free market pricing drive us to the point of someone noticing and sending cheaper gas.”
But that IS the free market working! When one player overplayed its hand, another stepped in because it became economically beneficial.
It seems like your argument always boils down to “THE FREE MARKET NEVER WORKS (until it does).”
Since mention of wildlife brings the intellectual discourse to a halt, let me reply with a more domesticated quote I heard in Europe…
If you feed a dog once and throw a rock at it ten times, it will come back to you hoping you will feed it again.
If you feed a cat ten times and throw a rock at it once, it will bolt thinking you’ll throw another rock.
Please don’t throw rocks at anyone or anything. You may miss and annoy a squirrel and who knows what happens next 🙂
But one can argue the gasoline market has treated us more like canines rather than felines. In other words, if the “free market” came to the rescue once and only after we were overpaying for months, then a whole lot of difference that made…
Rescue? Wow, now I see the source of your confusion.
People like you need to get out of the mindset of needing to be rescued. (Until your house is on fire, or you drive into a retention pond. Then it’s okay.)
The free market isn’t designed to rescue anybody. The free market is designed so that the participants can be as profitable as possible.
The gulf-coast producers don’t see our high prices and say “Wow, those poor people need relief!”
They see our high prices and say “It makes business sense for us to send some of our product up there.”
And you should be perfectly okay with that. That business sense for them just happens to provide a little relief — not as an end goal, but as a side benefit. We should be happy that our insatiable lust for their product isn’t costing us as much as it did before, instead of being angry that they didn’t provide it sooner.
And if you insist on being angry, then find a way to produce and sell the product at a much lower price that you think is more reasonable, and see how long you stay in business.
While you were too busy with your economics lesson, you neglected to answer basic questions:
Why is it that only rarely do these benevolent economic theories actually show up for work vis a vis gasoline prices in the Midwest? And why don’t they have a permanent effect on gas prices in the Midwest?
Specific answers if you don’t mind, not Econ 101 boilerplate like your last one.
I mean, it would have made an awful lot of financial sense to ship us gasoline earlier in the year when the ethanol “crisis” pegged us. Instead, we are seeing a temporary Berlin Airlift to help us feel better once since January, and be rewarded with a pair of spikes to 4.09 one before July 4 and one after. And for those who care, it’s the second time (2 weeks total :)) since January that we are under the national average. Go to Gas Buddy, get a six month price chart Indy vs national average, and tell me if I’m dreaming here. Especially from mid April to now, when we were quite disconnected from crude prices and had no supply issues…
I’m sure the response would be that it’s only feasible to send gasoline from the Gulf if the price differential is more than so and so, but kindly explain what could make it economically feasible to refine gasoline and ship it a thousand miles and still be cheaper than gasoline refined 20 miles away in Whiting?
I apologize for being a cynic but living in the Midwest for 3 decades and being played by Speedway tends to do that to one…
Your first question immediately violates a basic truth. There’s nothing benevolent about these concepts, nor is there supposed to be. Again, these people are in business to be profitable, not to sell products at a price that satisfies you.
As for the second question, why would anybody expect a temporary change in distribution to have a permanent effect? That’s like asking “If the sun makes it hotter during the day, why does the temperature cool down overnight?
There are no specific answers to those questions, because the questions are fatally flawed.
The third question is actually a smart question, but it has an answer: Because even as large as Whiting is, it still has a limited capacity!
The producers in the gulf have to a.) make sure their regional market is sufficiently supplied, and then b.) make sure the market forces in the Midwest are more than just an anomaly that will disappear before they can profit off of them.
You want producers to be able to flip a switch and immediately provide exactly the right amount of supply in exactly the places that need it the most. And I think it’s been shown over and over that your expectations are not realistic, and that you are quite quick to anger because the producers have perfectly understandable limitations and (gasp) profit motives.
The word benevolent was used in a humorous way, given the vilification of Big Oil by the people. Glad you got the joke.
The second question was equally misunderstood. If a temporary change results in profits, and the main business driver remains, in other words we continue to pay higher than the national average just because Speedway says we should, then it follows that the invisible hand of the market should intervene more often than it actually does…
Regarding shortages of gasoline in the Midwest, unless you are privy to information we can’t google, I am afraid I found no references to shortages or supply issues in the Midwest that explain our prices. In fact, Bloomberg reports record gasoline production in general…
http://mobile.bloomberg.com/news/2014-06-18/gasoline-production-rises-to-record-in-the-u-s-as-demand-grows.html
No shortages were mentioned in a couple dozen articles I spot checked…
1.) But we AREN’T paying more than the national average anymore! Why? Because market forces WORK. Increased supply (this time from outside the region) equals lower prices. It’s simple, and it’s infallible.
I already explained (several times) why things can’t just change at the flip of a switch like you so desperately want them to. You will continue to be very confused (and, thus, angry) until you accept this. They can’t just wave a hand and move product to the Midwest every time there’s a price spike.
2.) I never said anything about shortages. However, it was discussed WIDELY on this very site that there were major transportation issues in the Midwest heading out of winter into spring. Again, those things don’t just resolve themselves immediately.
But note that prices peaked (at least here in Indiana) exactly one month ago. As the glut was slowly resolved, prices started going down — EXACTLY AS MARKET FORCES WOULD PREDICT.
I’m sorry for you that prices don’t drop quickly enough. I’m sorry for you that oil and gas can’t be teleported wherever it needs to be at any given time. It’s just the way things are. But nobody is out to get you.
If you were “overpaying” for gas then you were still demanding the product. Apparently it was appropriately priced.
While the state of Ohio has finally in the last 2-3 days dropped below the national average at about $3.61, Cincinnati is still mired 20 cents above the Ohio average at about $3.81. The only explanation I can see is that we are lumped into the Northern 1/3 of Kentucky where much of that region is inordinately high.
If you are going to buy gas under $3.60 in the Greater Cincinnati area, with a few exceptions it is best to stay outside of the I275 circle.
Hey Ed, with the new tax law starting in Indiana July 1st, how will that impact your calculations? Could someone explain what the Indiana gas tax is now and how this new reform affects the prices to the end consumer? I’ve read a few articles that seem to be explaining it, but it’s about as clear as mud. I understand the tax will not be the same month to month but how it’s calculated and how it compares to our current tax has been very vague.
JT: Probably not going to see a big change. The new tax, is 7%, just like the old tax. BUT the Indiana state would like to take closer advantage of the ever increasing and fluctuating pricing to stations. They are now calculating it every month, much more often than before. Best explanation I found was from FOX 59:
========================
It replaces the prepaid sales tax on gas collected by gas stations. The Indiana Department of Revenue will calculate a rolling, monthly statewide average cost of a gallon of gas, and then add seven percent.
Gas stations will include the gasoline use tax in the price at the pump. The tax rate may change monthly based on the average Indiana retail price of gasoline.
The Department of Revenue will calculate the tax for the next month on the 22nd of the previous month. The first gasoline use tax will be determined before June 30, ahead of July 1, when the law takes effect. On that same day, the old gas tax is repealed.
Read more: http://fox59.com/2014/06/25/indiana-gasoline-use-tax-goes-into-effect-july-1-replaces-gas-sales-tax/#ixzz3678I4OOl
Anyone predicting a hike for tomorrow???
Turbo, if you can’t comment intellectually and don’t make sense, then why waste your time? You time and time again refute what people are trying to explain to you. Your simple mind of sending material north is ridiculous. It takes a week or more to ship gasoline here. You still haven’t realized that the price cycling mechanism benefits you and still complain about it. Can you finally digest the information instead of refuting it and sprouting non-sense?
Sam:
Going into a holiday weekend, history says a reset is possible tomorrow (Tuesday, July 1). However, I don’t expect a reset anytime before Monday, July 7.
Patrick, the jury is still out regarding the cyclical price model. If it was beneficial to consumers, or competition in general, Speedway would not be doing it, would they? Simple answer, I would think.
Likewise, if the cyclical pricing model was repeatable in market conditions other then the Speedway states, other states’ retailers would be doing it, too, right? Simple answer, I would think.
My comments reflect someone who has lived in the Midwest for three decades and understands enough of the oil business to ask pointed questions.
The kind of pointed questions the “experts” tend to avoid altogether or answer in riddles.
Maybe I don’t have all the answers, or any answers, but I don’t pretend to have them either, especially given the healthy dose of skepticism one needs to consume before looking into the energy market in general.
If I ask the same questions over and over perhaps the party line answer is insufficient or invalid to begin with. When a single company controls well over 60% of the market we casually bring up “free markets”? Really?
In a couple days we will have a spike to 3.79 or so, fun for some people who are paying 3.19, then up to 4.05 or 4.09 after the holidays. So some people will end up with a 20-24% price hike in a week regardless of the price of crude or the whims of wildlife.
Once anyone provides a rational, consumer benefiting rationale for this I will be happy to accept it. Telling me that we have paid higher – much higher at times – prices for 24 of 26 weeks so far this year and only 2-3 below and that somehow this benefits me as a consumer requires a lot of faith in the free market fairy, faith that some of us cynics may have lost decades ago.
Best Regards
Turbo: I feel for you. I have been playing their game, and winning for over 40 years when it started with Bonded and Speedway. The plain NAKED TRUTH is that if it did not benefit Speedway, they would not be doing it. PERIOD! Yes, you can beat the odds, but it takes work, and they are counting on most people and especially businesses not doing the work to beat them. It is free market, but it is a contorted free market, and a managed one.
Regarding my comment yesterday, my predictions are only for the lower peninsula of Michigan. Apparently, prices are resetting to $3.699 today in Indiana, which would be a price drop for most areas of Michigan.
Still find it funny that some find it “so” much work to beat the game. It only takes me 10 minutes each day to do a little research. And time is precious for me. Especially since I work 48 hours a week. During the fall and summer, I also take college courses. If I can find the time, others surely can.
As with anything else in the free market, you have to hunt for deals. They aren’t going to be handed out to you!!! Does that make every business a greedy place? Well, depends on how you define greedy. Remember, every business is out there to make money!!!!!
If a gas station wants to sell gas for 20 cents profit per gallon, so be it. Don’t like it, don’t shop there. If all gas stations are selling for that much, don’t buy. If everyone were to stop buying gas, there would be so much built up supply, they would have to drop the price a huge amount.
In summary, gas stations aren’t selling to benefit you. They are in business to make a profit. And they are testing the limits to see how much profit they can make and still have a good amount of demand.
And please note, so far we have not crossed the $4 mark, unlike last year.
I just noticed a few Indiana stations going up to $3.69 Diether. I thought for sure they’d shoot up a good 30-40 cents, but they didn’t. Another effect from the gulf coast gasoline perhaps?? I filled up in Indy yesterday morning for $3.32 and was shocked to see $3.89 all over the place when arriving for work outside Pittsburgh, PA in the evening.
Explain this one. Average prices
Toledo 3.40
Cincy 3.77
Columbus 3.53
Cleveland 3.59
No reason for it. You’d think that “cheap” Gulf gas would make more of a dent in the southern-most Ohio city.
Depending on which piece of legislation or which economics textbook you read, monopoly power exists when 2-4 firms control 25-50% of a market.
There’s a lot of talk about free markets in this thread, but what we’re dealing with here is anything but. In a free market, when every other station spikes, a few spike to 10 cents lower than the rest and get all of the customers for the next several days, and Speedway’s whole system breaks down.
We’re not dealing with competition, or free markets, or any analogue of scarcity. The fundamental market force in this gasoline market is collusion and/or some form of coercion. The federal government investigated for years and failed to find proof of this, yet it is obvious to the most simple consumer. Thus, it is either unofficial or well concealed.
Either way, it’s the consumer that suffers. It’s easy to say “if you don’t like the price, then don’t shop at that station” as if there were some choice. We are routinely and intentionally denied that choice. During a spike, every station increases to the same price within hours. Gasoline is an inelastic commodity; most people cannot simply do without.
Erratic as the market is, and as entrenched the companies that control it, and as high the infrastructure barriers to entry, there’s little incentive to other companies to enter. Prices would need to be hugely imbalanced for a very long time to entice a new entrant, and that presumes there are no agreements preventing such.
Only a fool of an apologist would claim this as an example of the free market working.
Turbo, if you’d like me to explain it to you and why its good for consumers and (some) gas stations, reach out via phone.
http://www.gasbuddy.com/gb_media_contact.aspx