Posted in: Gas Prices,
by Patrick DeHaan on Aug 26, 2010 02:04 PM
I'll delay our last part of our series on car insurance- we'll cover that tomorrow. Back to the topic!
Supply? High. Economy? Lousy. Demand? Virtually flat. So what's driving the increase in wholesale prices today? One little report... about jobless numbers.
Jobless claims dropped more than expected and apparently that means that demand will increase, supply will somehow drop even while driving season is nearing its conclusion, and that the economy will grow at double digit rates. Oh wait- but its highly unlikely that any of that will even happen. We're in the midst of another knee jerk reaction by traders- buying at the first sign of promise... only to be let down later by another bad economic report.
Wholesale gasoline prices were as low as $1.80/gallon in areas yesterday, but have jumped to $1.95/gallon as we speak in some areas. In light of the sudden increase, you'll likely see stations raise prices... even stations that didn't lower their prices to reflect their recently lower cost. Stations are making out extremely well in some areas. In Marion, Ohio, for example, stations had barely even lowered their prices. They were selling for $2.72 a few days ago, about 20-cents higher than their wholesale price, and you can bet that today they're thinking about raising prices.
Truth of the matter is this- supply is almost through the roof. Even if a hurricane did hit spot on, we'd still have plenty of supply to last us. We're also almost done with the driving season- people are getting back to work, the kids going back to school. Demand will be lousy for a majority of the autumn months.
Natural gas futures are even trading lower as their biggest time of year- winter- approaches. That's how out of line gasoline and oil prices are with reality. Until prices reflect fundamentals, I believe the economy will continue to sputter. How've we improved as a country so much? Wall Street got buyouts, but Americans continue to have difficulty finding work. How is oil making gains as supply grows and demand remains flat? It makes no sense. In times like these, I believe more regulation is necessary, and I'm not necessarily one that likes more regulation, but it just makes sense.
Having said all that, prices are going to being to slowly rise in areas that have seen the largest declines. We're in the midst of an attempt by Speedway to raise prices. So far, they've raised prices in Michigan to $2.69 and Ohio to $2.65. You can bet they'll try and raise prices in other areas of the Midwest. I wouldn't be surprised to see prices jump in Speedway States. Everyone else? It wouldn't be a bad time to find the lowest price and fill up!