Tag: gouging

Spike possible tomorrow

If you haven’t already, do look at the previous post Ed put out about gouging in Michigan. These are good reads for those interested in the oil industry, too.

Now, on to business. With a spike up in everything oil/gas/diesel, we are very ripe for a spike tomorrow. I’m putting it at about 65% possible. The margins for Michigan and Indiana just fell below 0 today after riding a period of profit taking. It’s possible we won’t see a jump tomorrow as Speedway and the other stations wait for the weekly DOE report Wednesday for which direction we should see for the end of the week. But it’s been a while since the last one, I’m betting on a spike up to the $2.67-2.73 range.

Do fill up tonight/early tomorrow as spike protection.

Today’s Reading: Gouging in Michigan; Too Much Speculation

A couple of articles have come to my attention recently related to gas pricing.

#1: Some Lansing gas stations pay fines for gas gouging last September.

#2: Jim Hightower comments on the “Magic of the Marketplace” that led to the run up in energy prices the past few years.

#3: A recently-published story in Rolling Stone blaming Goldman Sachs for their contribution to high energy prices.


Why aren’t gas prices lower?

Tuesday, October 21, 2008, 9:20 AM:  The following question has been posed to me several times the past month:  On July 15, oil was at $145 a barrel, and gasoline cost $4.25 a gallon at the pump in Grand Rapids.  Last week, oil was $72 a barrel, and gasoline cost $2.96 a gallon.  If the price of oil has been cut in half, why hasn’t the price of gas followed suit?

There are a few reasons for this, that I will try to explain.

1.  NYMEX.  Oil and gasoline futures are traded on the NYMEX, a public market with prices available for all to see.  The price of these future contracts helps set what is called the “spot” price, which is what is actually charged when real oil or gasoline changes hands at the wholesale level.  Sales and other taxes are not included in the NYMEX prices.  Looking at these futures prices, both oil and gasoline has dropped approximately 50%, so at least at the NYMEX level, these prices are correlated.

2.  Taxes.  There are three taxes applied to the wholesale price:  the federal gas tax of 18.4 cents per gallon, the state gas tax of 19 cents per gallon, and the sales tax of 6%.  So, that’s at least 50 cents of the retail price that is taxes, regardless of the wholesale price (except for the sales tax, of course).  In the past three months, those taxes have not been cut in half, so it would be hard for the retail price to drop 50%.

3.  Chicago Summer Premium.  I coined this term a few years ago to describe how, during the summer months, the wholesale price in the Midwest is usually higher than the price based on NYMEX.  The reasons for this have to do with reformulated gasoline, variations in supply and demand, and some other mysteries I’ve never solved.  A way to monitor this premium is to look at the wholesale numbers for selected Midwest cities that are posted on AXXIS.  The NYMEX/AXXIS difference was 20 cents on July 15, over a dollar in mid-September when Hurricane Ike struck, and is currently still 41 cents.  The AXXIS price has not dropped in half the past three months, and this may still be a hangover from the hurricanes.  It is also the first place I would look for gas gouging if I was the Attorney General.

4.  The Dynamics of the Retail Market.  As a journalist said to me last week, “Up like a rocket, down like a feather.”  We’ve documented time and again on this site how this works, with the big price hikes followed by the gentle day-to-day drops, while the wholesale price fluctuates in the background.  Our last price hike was during the September 12-14 weekend, when prices got up to $4.29 on 28th street.  Since then, the drops have been slow but sure — some days one or two cents, other days seven or eight cents.  In an area where there are several stations, one station decides to drop their prices a few cents because a cheaper shipment came in that day, and the other stations follow suit.  The point is that the retailers aren’t setting their prices based on trading on NYMEX.  They are setting it based on their costs, what their competitors are doing, and what sort of business they are getting.  Are the retailers making extra money right now?  I doubt it, as our monitoring indicates they are still dealing with high wholesale prices in the Midwest, and some of the gas in their tanks cost them $2.95 a gallon last week.  But prices continue to fall, slowly but surely.

All this leads to my latest prediction:  It looks to me like the chaos on Wall Street is dissipating, so energy prices are starting to stabilize.  I expect Speedway and friends will decide it is time to straighten up their prices, with a reset by the end of the week to $2.89.

So Granholm/Cox, if someone found a station gouging…

Last time I called the Michigan AG on gas price gouging, I was given sympathy “Oh, I know its terrible, isn’t it?”, I had accurate information, the station address, and NOTHING WAS DONE. No questions asked, no investigation, no taking of my name and information, no taking of the other information I had as well.

Will the State of Michigan to do something about this station that a GasBuddy took a photo of on Sept. 11 in Lansing? The station turned off their sign once camera crews arrived, but here it is. The GasBuddy managed to get a photo of it. Now- let me guess. The State says they’re interesting in prosecuting stations that gouge, but they’ll likely say I had to fill up with the ultra expensive gas to prove it. Why waste my money and support the morons that did this? Shouldn’t a photo be enough to prosecute?

Lets see if any local media stations will pick up on this ridiculous station’s attempt to gouge. If you can’t see the image well enough, the price for regular is $6.55. The station claims a malfunction, but I don’t see how you can screw this one up. Its not like they meant $3.55, that would be too cheap. $4.55 would be gouging as well… so $6.55?

OK, State of Michigan- you advertise that you’ll protect the consumer and prosecute stations that gouge, so here you are. If anyone has a receipt showing purchase of fuel in the West Michigan/Lansing area on Sept. 11-13 that is over $5 gallon, I will personally give you $50 for it’s use.

$4.09 comes a bit late, whats next?

First off, any rumor of $4.50+ gas in the Midwest is FALSE.

Just home from work and posting here to help aid in killing false rumors.

First of all, don’t expect shortages of gas. There is no need to panic buy, prices will come down over time, but the worse thing folks can do is think there isn’t enough gas. Thanks to the Canadians, we have oil flowing in from up North. Some Midwest refiners can refine the lower quality Canadian crude oil, so we really shouldn’t be worried. The only worry I have is how fast the Gulf refiners can get back online. Most pipelines and refiners in the Gulf are either still closed from Gustav or have closed due to Ike.

I don’t see prices going any higher this weekend than $4.25 MAX. It shouldn’t even get that high. The Governor is well aware of the situation and appears to have Michigan’s resources ready to fight gouging.

I have to say, gouging isn’t even likely. With so much competition, one station that starts to gouge would have to be followed by more. With corporate owned Speedway, it simply isn’t likely.

More later.


Diesel consumers: your price drops are here!

I think you’ll agree with me on this one- Diesel consumers have LONG awaited the price drops that gasoline has seen. Since gasoline has dropped mid-July, diesel HAS followed its drop on the wholesale market, BUT for some reason, those price drops really never made it to large chain retailers. Even as I write this, some of the SAME BRANDED stations have diesel prices ranging from $4.39 to a whopping and unreasonable $4.69! Its a rarity for Grand Rapids to see this sort of range for gasoline (Have I ever see gasoline price ranges of 30-cents on non-hike days?) Even this station pictured below had sold diesel for as much as $4.79 just days earlier… what is going on? I’d say there is some gouging here, but hey, the Attorney General’s office of this State seems to turn a blind eye to “gouging” (at least when I called a few weeks ago!)- but WHY? Who has donated money to him?

Diesel continues to trade lower. Stations in nearby Indiana have diesel as cheap as $4.19… the price drops should continue! SHOP AROUND is the best advice I can give you.

Just down the street at BP, take a look what diesel runs!

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