Tag: oil

The Speedway Effect, Cincy style

Recently there was an article and news story on WCPO in Cincinnati about Speedway. In it they said a lot of things TheGasGame readers would already know, plus something I found interesting at first, and one outright falsehood.

They come right out of the gate letting us know Speedway’s secret: Real estate.

“We wanted to know how Speedway is able to change its prices market-wide without fear of what the station across the street is going to do. What we discovered is that in most cases, there is no station across the street.”

They used Google Maps and Street View to confirm that 63 out of 92 had no direct competition. This is how they are able to raise prices and not worry about the competition. I had never thought of this before. I started mapping Indianapolis Speedways, and sure enough, 30 of the 52 stations there have no direct competition.

I thought about this revelation a little further, and it really isn’t a Speedway thing. I found about the same ratio of other branded stations have stand alone stations compared to ones having competition. And then, it is also rare to see a Wal*Mart next to a Meijer, or Target; and a Lowes next to a Home Depot. Seems Speedway’s secret isn’t much of a secret at all. Not to mention they don’t do anything to prove this is why Speedway raises prices the way they do.

Then there is the outright falsehood.

“The vast majority of Speedway locations jumped to $2.65 with no corresponding spike in oil prices. Oil futures did go up 3.2 percent the day before, but gas prices in Cincinnati shot up by nearly four times that amount. And oil prices were actually falling while our gas prices were rising that Tuesday.”

The article and story was run on the 25th, but the spike up in prices happened on the 17th. Oil went up on the 17th, not down. Also, oil does not set the price of gas in this area (the PADD II). That would be the Chicago Mercantile trading of the Chicago Spot.

An analysis of the Chicago Spot from November 9th to the 17th shows that while it rose from $1.8218 to $1.9224, the average price of gas fell, almost 11 cents in Indiana, 9 cents in Michigan and 13 cents in Ohio. The Speedway spike caused averages in those three areas to go up 17 cents in Indiana, 11 cents in Michigan (with higher UP prices included), and 22 cents in Ohio.

They were far from jumping up with no correlating spike. They did not even meet the difference in each area. A 10 cent rise added to how the average fell in each area shows Speedway undercut Indiana by 4 cents, Michigan 8 cents and 1 cent in Ohio.

The rest is stuff we here at TheGasGame have been preaching a long time, long before even I came along. Speedway is the leader, selling 1 of every 5 gallons of gas. They have more corporate stations that any other. After Speedway rises, others follow, a statement that flies in the face of the earlier revelation that Speedway stations have no local competition.

If you haven’t visited the “Speedway Effect” article here at TheGasGame, I suggest you do so. You’ll learn far more accurate information than you did with this article. Also, if you have followed me at my Fair Price threads in the GasBuddy forums in Indianapolis, Indiana and Michigan, you can see I have discovered the pattern, and can pretty accurately predict when a spike will happen.

My new feature here at TheGasGame continues that. It’s called “The Spike Line”. It is a new name for what I have been doing all along in the “Fair Price” threads. It’s just a more accurate title. When the Spike Line is crossed, you can expect a spike up in prices from Speedway, it’s that simple. If there are other circumstances to cause or prevent a spike I’ll let you know that there as well. It’s just another way that TheGasGame is helping you save money. It’s one of the big reason’s I am proud to be a part of it.

Gas, Oil on the up and up (and up, and up…)

Chicago Spot: $2.03 UP 0.0079
Fair price adjustment: 0.7914
Michigan Fair Price: 2.6792
Michigan Average selling price 2.5970
Margin over cost + profit: -0.0822

The dam has gotta break sometime. Gas usually falls at least 2 cents on non-spike days, but over the weekend it didn’t budge, or only went down a couple cents, depending on where you live. The average in Michigan is only .3¢ cheaper than the Thursday spike price. Stagnation like that shows stations are feeling the pinch. The fair price is 8 cents above the current average, too.

Expect a spike tomorrow. Most of Indiana will see 2.65-2.70, while Michigan will be 4-6 cents higher, and NW Indiana will be 5-10 cents higher.

Gas prices to go up over weekend/early next week

The stat line goes like this:

Fair price: ( $1.9374+$0.6413 ) = $2.5787
Average selling price – fair price: ($2.537-$2.5787)=
Margin over cost + profit: -$0.0417

In other words, for Michigan, you are selling at more than a negative 4 cent margin by my numbers. In Indiana that is more than 6 cents, and that’s with 5 cents taken out of the fair price due to the Indianapolis rack being so much lower than Chicago’s. This usually means spike. But we are going into a weekend, and Speedway rarely goes up on Saturday and never has on Sunday since I have kept track.

I have seen weekend spikes up in price from local retailers. Companies like Schmuckal Oil in NNW Lower Michigan, Wesco in W Lower Michigan and Atlas Oil in Indiana, a few in Michigan and Kentucky (check out our links page to see their websites and see if their is a station in your area.) Meijer also has spiked up on the weekend.

My point is we are very close to a spike, and we may see the price spike up over the weekend/early next week. Keep an eye on your local retailers, as they may spike up, even if Speedway doesn’t. Good luck out there.

New week, prices should still fall

It looks like speculators are getting the boot when it comes to gas and oil. As of this morning they continue to fall as more bearish fundamentals are being used to control the market. What this means for you is even lower prices in gasoline.

Currently the average price of gas is beginning to catch up to wholesale, which has dropped more than 30 cents since it’s high on June 30th. Margins are at about 10 cents, from a high of 25 cents last week as prices have dropped 20 cents since July 2nd.

If wholesale were to flatten out now, we could see our prices level out in the low $2.30s. But the forecast is for wholesale to drop even further. Widespread $2.20s could greet the end of the week, and the near future could give us some stations into the $2 teens.

Focus turns to the futures market “casino”, Goldman Sachs

It looks to me like powerful people are starting to pay serious attention to how much of the ups-and-downs in energy prices has been driven by a “casino-minded” attitude towards the future markets. Last week, PVM Oil Associates employee Steve Perkins lost $10 millon in a day playing the “electronic oil casino”. This week, the Commodities Futures Trading Commission is going after Goldman Sachs and others concerning alleged manipulation, or perhaps the word is abuse, of the futures markets. (There is a lot of other nonsense going on with Goldman Sachs, too.)

All this news shouldn’t come as a complete surprise to readers of The Gas Game. We’ve been talking about the effects of speculators and “investors” in the energy markets for quite a while.

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.

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