2:00 PM: NYMEX futures prices have fallen another 14 cents this week. Right now, that puts the 0-cent margin price at $2.19 and the 20-cent margin price at $2.41. However, we know that prices have been staying above the 20-cent margin price the past few weeks due to the “fudge factor” difference between New York and Chicago prices that is probably still due to hurricane damage. Nevertheless, prices will continue to fall, perhaps with some drama, this weekend and Monday, so don’t rush to fill up. Prices continued to fall, slowly but surely. The morning of 10/19, you could buy gas for $2.47. The prediction was essentially CORRECT.
Tag: fudge factor
Monday, September 26, 2005
Wrong predictions like last Monday’s require you to go back and look at your calculations. The problem the past several weeks has been the “fudge factor” that takes into account the difference between the NYMEX futures prices and the wholesale prices in western Michigan. When Katrina struck, the FF was at least +20 cents, which contributed to prices of $3.39. But based on Friday’s price hike, the FF is currently -15 cents. Before Katrina, the FF varied at most between -10 and 10 cents, so you can see how this is making predictions impossible. So, let me just share what I see right now: with NYMEX prices down to $2.00 a gallon today, the 0-cent margin price (with FF=0, like last autumn) is $2.53, and the 20-cent margin price is $2.74. As I drive around town, I’m going to this to help decide whether or not to fill up the next two days, but prices could fall to $2.39 again, or up to $2.79. Maybe the crystal ball will be clearer later this week. The crystal ball has been broken — price hikes on Wednesday and Friday? Rumors of wholesale prices above $3?
Monday, September 12, 2005
More good drops in gasoline prices on NYMEX should translate into lower prices over the next several days. Using this afternoon’s futures quote (approx. $1.85), and plugging into my formula (with a “fudge factor” of 0 cents), gives a 0-cent margin price of $2.37, and a 20-cent margin price of $2.59. So, c’mon retailers, let’s pick up the pace in passing those price drops along to us! (By the way, that’s a prediction!) Are there really stations still asking $2.99 this afternoon? We fell to $2.54 in Standale by Sunday evening, much lower than the $2.79+ we were seeing on Monday. CORRECT prediction.
Monday, September 5, 2005
It is Labor Day, and I am full of random thoughts. (1) Looks like Gov. Granholm was playing her own “gas game” with Marathon/Speedway, according to Saturday’s GR Press, as she commended “the state’s largest supplier of gasoline” for dropping prices to $2.99 a gallon on Friday. (2) They probably dropped the price because wholesale prices got back under control on Friday, with the futures losing at least 20 cents. Today you can buy gas in town for $2.88 a gallon! (3) Should I feel complimented or annoyed at the GR Press’ new feature on page 1: “The Gas Gauge”? (4) If the way the retailers calculate gas prices is returning to normal, and if there is no “fudge factor” adjustment to make because of shortages in the Michigan/Illinois region, then the 20-cent margin price this weekend on new shipments is $2.85 a gallon and the 0-cent margin price is $2.64. There’s been an adjustment of about 10 cents upwards the past three weeks, so figure that on Tuesday, the floor for prices is around $2.75. (5) I’m going to predict prices keep falling until Thursday, and then they get reset, and we start over again. These days, it is foolish to predict three days in advance, so I plan to post an update on Wednesday. Prices have been falling verrrry slowwwwly since Monday, so I don’t think the prediction is worth grading.
Wednesday, August 31, 2005
If the choice was paying $3 a gallon for gas or being a resident of New Orleans or Biloxi, I would choose the former.Now, what’s next for gas prices? The September gasoline futures contract, which expires today, went out of control yesterday, rising from $2.06 to $2.47 a gallon. I’m having a hard time believing this is a good approximation of wholesale prices. What I do in my calculations is average the current and next month contracts, and that gives us an estimate of $2.34 on wholesale prices, which corresponds to $3.10 for retail prices, with the 20-cent margin, but no fudge factor. Meanwhile, the government just announced that it is going to release oil from the U.S. Strategic Reserve, and there are reports on grandrapidsgasprices.com that Speedway just posted another price to $3.19. Right now, I can’t even guess what is going to happen five minutes from now.
And on Thursday, prices went up to $3.39, but not everyone matched that price hike.
Monday, August 29, 2005
Twelve hours ago, I posted the following to grandrapidsgasprices.com: “This is how the logic of this week looks to me right now: Catagory 5 Hurricane Katrina –> shut down of refineries on the Gulf Coast and worries about New Orleans being damaged –> upward spike in oil and gas prices on NYMEX and elsewhere –> $2.99 a gallon.” Since then, trading in oil and gasoline started up, with oil going over $70 a barrel, and wholesale gasoline trading at $2.1215. Oil has back off since then, but I don’t have an update on gasoline. Using the $2.1215 price, along with a fudge factor of +11 cents that has been typical this month for some reason, I get a 20-cent margin price of $2.99. Now, this jump due to Katrina may be a one- or two-day spike, but every spike in wholesale prices has been passed along in the past. So, I figure we see a price hike today, and I wonder if Speedway will get clever and make it $2.98 so that Shell and BP can post $2.999 and not $3.009. It wasn’t until Tuesday afternoon that prices shot up. Most places went to $2.999 (and not $3.009), but the Meijer’s stations are showing $2.89. I’ll consider my prediction half WRONG and half CORRECT.
Monday, August 22, 2005, 7:45 AM: Although we’re learning that we need to be careful about people in the industry making these predictions (what is this, twice this summer?), my new friend from last week had some good information about wholesale prices in Michigan being higher than what is being indicated on NYMEX. This explains to me why prices have been slow to drop the last several days, as the NYMEX numbers suggest we could go down to below $2.50 before the next price hike. So, I feel like I am flying blind here right now and I’m going to beg off making a prediction. Due to the school year getting started up again, this will be my only posting this week. A price hike to $2.75 was initiated on Thursday, but it wasn’t embraced with enthusiasm by the gas stations. By Sunday evening, you could find gas for $2.52.