Sunday, October 26, 2014, 5:00PM: On June 5, there was a hike to $3.99 in Michigan. Today, you can find gas under $3. What a move! Looking ahead, the recent jump $3.19 coincided with another drop in wholesale prices, so there is a lot of room for prices to drop this week. I would be looking for gas below $2.90 soon.
Now, what explains this 25% drop in retail prices since June, and an even better record the past several years? I have a few theories: (1) In September, I wonder if some hedge funds got caught “leaning the wrong way”, betting on higher energy prices. When that did not materialize, they had to liquidate their bets, causing a sudden drop in prices. I have no evidence of this, other than I’ve seen this happen before, especially in stocks and other commodities. (2) There is significant evidence that the demand for oil and gas has been falling the past several years, while the supply has been rising, due in part to significant increases in US production. We have been driving less, buying fewer cars, and fuel efficiency has been improving. Consequently, we have been buying less gasoline (which is what the Democrats wanted), while supplies have been increasing (which is what the Republicans wanted). Hence, a bipartisan victory — lower prices. (3) Energy “investors” are looking at the Middle East differently than they did a decade ago. Then, with the war in Iraq, there was a “global tensions premium” built into energy prices. As our involvement in Iraq has wound down, the premium has slowly disappeared, and, in the case of the past few months, not so slowly. What is confounding about this theory is that we have new Middle Eastern tensions (a.k.a., ISIS). But, perhaps ISIS is not as big a deal as it appears, or perhaps the US really is heading towards energy independence as politicians have talked about since 9/11, and finally, in 2014, we are starting to reap the benefits.
In terms of the Gas Game, it is harder to predict price hikes when there are fewer hikes. But I’m not complaining!!!! — Ed A.
We are producing more oil here in the US. Some of it is not easy to get to, and it costs more to get out of the ground than traditional drilling.
That being said, Saudi Arabia has stated that they are not going to drop production to keep prices up. Thus the prices have fallen on a global scale. We are so close to getting below $80 a barrel. We are using less as well (although globally we are still using more). It is also the time of year for prices to fall.
So could we see oil in the $70s and RBOB/CBOB below $2 by the end of the year? It is quite possible.
Actually, Saudi Arabia did reduce the amount of oil supplied last month, even though they didn’t reduce their production.
http://www.fool.com/investing/general/2014/10/25/oil-news-saudi-arabia-blinks-first-cuts-oil-suppli.aspx
Thanks for your thoughts Ed. Spot on.
Cincinnati avg is $2.90 and change this morning. It has dropped roughly a dime since Friday. We are seeing $2.68 North of the I275 loop in Fairfield. Our Buick was on fumes when we filled up for $2.89 Saturday. I estimate the same tank of gas would have cost us nearly $18.00 5 months ago which is huge.
If you would have told me this at the end of May I would have said you were crazy.
South Bend, IN avg is now $3.01, I think that’s the lowest in 4 years. Some stations moved down to $2.89 last night. Haven’t seen a $2.** in 4 years!
We have two Thornton stations North of Cincinnati at $2.62 this morning. Contrast that with chronic price gouger Marathon in Madiera at $3.59. Even our list of high price stations gas stations on Gas Buddy has a half dozen $2.99s.
The average in Cincinnati is $2.86.
2.999 Speedway spike underway in Ohio.
Paid 2.659 this morning.
Just came back from The North Country this evening. Kalkaska Grayling area are around $3.15 while a little bit further south at Lake City its $2.98 Even further south in Lakeview/Six Lakes its $2.89.
We are awash in oil. US production cost average according to an article I read was 57 bucks a barrel at oilprice.com. Fascinating days ahead…and I expect the Russians to get Jiggy and maybe the Iranians may make a nuclear deal to kick start their dead economy cause OIL ain’t making it anymore for them…
Everyone wasted no time in joining Speedway at 2.999. By 5pm, everyone along my commute(about 12 stations) had made the jump.
Pipeline problems in my part of Michigan. Prices are going up I’m guessing.
Pipeline problem? They must have run out of squirrels…
The squirrels are all hibernating. Must be rats now.
Cue in the outrage posts by the usual cheerleaders 🙂
This is just like watching Pro Wrestling on TV… Prices high – everything works well for a while then demand drops, prices drop a bit, just in tine for geopolitical “unrest”, weather, extended maintenance, and the ever popular pipeline issues…
Honestly, given that the 3 states with strong Speedway presences all have gas taxes that rank in the upper half of those of all U.S. states (Ohio’s is the 21st highest, and Michigan and Indiana are the 6th and 7th highest respectively), I don’t see how a spike that brings prices to a level that were still a penny or two below the national average yesterday constitutes greed. One could have conceivably argued that greed was a factor last spring when the spikes took Ohio/Michigan/Indiana’s prices to almost California-like levels, but now? It makes no sense at all. I’m not sure why some people believe that Ohio, Michigan and Indiana should consistently have some of the cheapest gas in the country considering where these states’ gas taxes rank.
North Carolina ranks 8th in taxes, without a major difference in taxes from Indiana.
Yet in the chart below one can readily see the impact of the ‘Speedway Effect’ regardless of what is going on with the National average.
http://www.IndyGasPrices.com/retail_price_chart.aspx?city1=Indiana&city2=NorthCarolina&city3=USA%20Average&crude=n&tme=36&units=us
If one is keener, they can do a 4 year between the two and see that things were peachy all the way till the point where we started noticing that Speedway was really bringing their margins up, maybe around early 2011. From there on IN has been consistently higher than NC.
http://www.IndyGasPrices.com/retail_price_chart.aspx?city1=Indiana&city2=NorthCarolina&city3=&crude=n&tme=48&units=us
Notice how for Indiana there are jagged lines & NC rounded. The Speedway $0.20+ spike days.
It’s probably a lot worse than it looks because the sample prices reported are not representative of the actual population due to zone pricing. $2.49 in Tipton vs $2.99 in Indy renders a $2.75 average but in reality Tipton is 10000 people vs Indy’s million.
$3.13 in Atlanta, MI yesterday. We didn’t buy it there – LOL!!
My cost is 3.09 today.
Family Express leading a spike to 2.99 in La Porte County.
“I don’t see how a spike that brings prices to a level that were still a penny or two below the national average yesterday constitutes greed.”
Hey, somebody gets it. Nice job, Lamby.
“My cost is 3.09 today.”
And places in Indy are selling for 2.71… That’s 40 cents a gallon loss. And there’s a LOT of stations (in the usual zones of course).
Has anyone given any thought to the (conspiracy theory theme) existence of different wholesale costs for different retailers, branded or not… I mean, inside is inside, but ten gallons at 40c a gallon loss is $4, unless the guy buys a dozen candy bars and five gallons of pop the math does not add up.
Are the ‘branded’ chains paying the same wholesale as the independents, and if not, how much less? if they are, and are still doing it with the blessings of the home office, is that not a blatant effort to wipe out the independents who can’t sell at 40c a gallon loss?
Any corrections to the above conspiracy^H^H^H^H^H^H^H^H^H^H theory would be appreciated.
2.799 near me tonight(northern suburbs of Cincinnati.
Independent retailer paid 3.09 on the 3rd and chicago spot was 2.07 on the 4th, seems to me the tax calculations are getting a larger spread as well.
Starting to see ~3.09 in grand rapids today, which is a 10-20 cent rise.
Looks like Speedway is making the push back to $3.09 in Michigan.
@Independent Retailer — if your cost is $3.09, that would explain the hike today. There must be something not factored into my spreadsheet, because I’ve got a $2.14 Chicago spot price which converts to a cost to retailers of about $2.81, nearly 30 cents less. Hmmm …
Squirrel Insurance premium…
Meijer just sent out their infomercial text also…
My cost today is 3.06. Last week there was a “pipeline issue”, but I thought that was corrected. My supplier is still pulling fuel from Niles which adds to the cost I’m sure.
Kazoo just went to 3.09. Must have got a new stock of squirrels..
Wow…a spike that didn’t go over $3. Not often you can say that lol. Speedways in Delaware County just flipped the switch from $2.75 to $2.99. Must be some chipmunks hanging out with them thar squirrels. I expect the Pilot station to counter with $2.89 forcing the big “bully” back down in 24 hours as is usually the case
In Fort Wayne, it’s all the Lassus/Handy Dandy that are at $2.99, and one, just one Speedway, the one next to a Lassus station.
Flint Mi. has mix of 3.09s for adjusted stations, then in various degrees, 2.80s, 2.70s, etc and my personal good fortune was gassing up at 2.61 this afternoon. I’ll be interested to see if that station bounces to the agreed on 3.09, which would make for the largest individual station spike I’ve seen yet. 48 cents.
Shenanigans. That said, I haven’t paid 2.61 since 2k6
Spot down below 2.06. Must not have been to big of a deal….
Kentucky jumped to $3.099 today as well.
Guess Ohio will get ours tomorrow. Makes no sense. Someone is padding their margins, somewhere.
Spike to $2.99 in South Bend, IN today. Up about $0.10
The spike to $2.999 in Indy raised the average only nine cents before it started dropping again today. That’s one of the smallest increases I’ve seen in a long time.
I’d actually call it a correction before I’d call it a spike. We’ve remained at or below the national average all month.
Not true for Fort Wayne that seems to spike higher than most places. Right now being above National Average again.
http://charts.gasbuddy.com/ch.gaschart?Country=Canada&Crude=f&Period=1&Areas=USA%20Average,,FtWayne&Unit=US%20$/G
Here, we seem to react quicker and in lockstep much much quicker than any other place.
Gas Buddy rates Fort Wayne as the place of highest single day price spikes.
https://images.gasbuddy.com/images/blogimages/20130820110351Jumps.JPG
Actually if they looked closely, it all happens in 4 hours, not 24.
Sorry, you’ll have to copy and paste the first link. Auto Hyperlink sometimes fails in this forum.
Filled up near my suburb of Cincinnati at $2.74 but if I deemed it cost effective enough I could have went North to Fairfield where $2.64-5 can be found more often than not. There is even a Costco at $2.62 nearby.
I fear the margins are thinning and GREEDway soon may not be able to help themselves.
GREEDway spike to 2.999 underway in Ohio.
Paid 2.649 yesterday.
Looks like it’s Ohio’s turn to spike. $2.99 is the memo price.
Yeah, the upper Midwest and Great Lake area has a 30 cent jump and other parts of the country continue to drop a couple of cents a week. Guess we got bigger badder squirrels than they do
GREEDway around Cincinnati usually spikes between 10:30 – 11:00. Their latest trick is to wait until noon to pull the $2.99 trigger and between 12:00 & 1:00 have at least 90% of the GREEDway stations at the memo price. That way they can herd most of the sheep stations to the memo price before evening rush and most of us commuters that didn’t already fill up are stuck.
We are full on the one car and at least 3/4 full on the other so that isn’t too bad.
Mike, which market specifically has seen a 30-cent increase in average price? I’d be interested in seeing the chart.
Average spikein Cincy is 20 cents(2.80 pre-spike). The LOWER-end stations spike 37 cents.
I saw a Speedway station in Ft Wayne at the corner of Getz and Jefferson advertising $3.92. I knew it was a mistake when the BP across the street showed $2.92. Guess someone punched in the wrong digit lol
Lets seen Ren, On Nov 4th we were 2.79 in the Kzoo area. On Nov 5th we jumped to 3.09. I might not be the brightest light bulb in the package, but I do believe that is 30 cents. At the same time other parts of the country dropped 2 cents. How do I know. I check every time we jump it they do and for the most part they do not or like I said, they actually drop. Only in Greedland…
Check out the the top four in the midwest.
https://images.gasbuddy.com/images/blogimages/20130820110351Jumps.JPG
Fort Wayne leads the US in AVERAGE spike. At 34¢ being the average, you can imagine what the highest spike must have been. I know, I lived it. It was 50¢. Yes, the average price of gas in Fort Wayne spiked 50¢ in one day. four hours, as a matter of fact.
And it’s no coincidence that the FIVE highest spikes are all in the GREEDway-controlled area are of the country(OH/IN)……
Nothing to see here. Nothing at all. Move along.
Let’s see, Mike. All I did was ask an informational question out of curiosity. Save the sarcasm for somebody else. All right?