It seems that gasoline prices have been getting more and more unstable lately. This week we saw average gasoline prices fall to their lowest level in 2010, but we also saw the first time in weeks that gasoline prices began to push higher. We also saw cheap gasoline prices in the Midwest completely dry up and fall right back in line with other areas.

Let's start off on that- Midwest gasoline prices. Supply was plentiful and buyers seemed absent from the market late last week and early this week, driving buyers out of their mind. It seemed that no one was around to buy their gasoline, so prices fell dramatically. Earlier this week, gasoline for delivery in a few areas of the Midwest were as much as 20-cents cheaper than gasoline in other areas of the country. As I write this, that discount has nearly dried up. Wholesale prices in the Midwest have easily seen the largest increases this week as prices not only surged higher, but discounts dried up.

Even against a good DOE report yesterday, gasoline continued its rally higher- showing what a disconnect we have between traditional supply and demand issues and speculation. Oil started the week in the low $70 area, and may end the week over $80, an astounding change given that there was no real significant news this week, besides a few minor economic reports.

Demand remained more than lousy, according to the DOE report, yet prices marched higher, and will continue to do so for the next week or so as retail prices catch up with the rise in wholesale prices.

We also saw a gasoline station in California raise prices $6/gallon- that's right- six bucks per gallon- overnight! The price spotted was a whopping $8.87 per gallon at the Pasadena station, where motorists were apparently still filling up, according to a local news story. Few drove off upset as they left- understandably! One must wonder if the price hike was an angry response to rising wholesale prices.

Either way, it was another roller coaster week. I'll go on the record saying that I expect gasoline and oil prices to drift lower early next week as traders "wake up and smell the coffee".

Have a great weekend, and please- don't pay $8.87 for gasoline!