x~~~~x~~~~x~~-~ BEGIN San Diego 12:08 PM October 4, 2010
Inversion Perversion - back above $3 by Thursday?
GAS - Buy, Buy, Buy, Buy
DIESEL - Buy, buy, buy, buy
OUR PREVIOUS PREDICTION:
We said gas prices could drop a penny, but strongly indicated that they would climb as much as 3.5 cents.
Diesel screamed up by 6.5¢ - see analysis.
We haven't seen a logical reason for the blast-off in high wholesale prices this week, other than a jump in oil prices, and as we observed on Thursday, oil prices are on the future's market while the spot price of gasoline, which has climbed 11.2¢ since Thursday, is the "on the spot" cash price for gasoline purchased right now.
On Thursday we said this:
"We are close to a rack inversion where the price of surplus gasoline costs more than the price of brand name gasoline at the wholesale level. If this keeps up, prices will also go up even though there is no shortage of supply."
That's exactly what happened. The cost of surplus gasoline that is sold on the spot market is rising. The stations that buy this gas are the unbranded and independently owned stations. These stations tend to be much more competitive, but right now, their gasoline - which is usually purchased at a discount - costs more than the wholesale prices that are being charged to brand-name dealers. In addition, oil moved out of the $70 to $80 a barrel price box and solidly into the $80 plus range, nearly hitting $82 this morning.
The huge spikes in diesel prices bely an even bigger price on the street - rememeber, we report an average price, and many brand name and unbranded dealers jacked up their street prices by 10 to 15 cents a gallon over the weekend.
RUL prices for Indy retailers have jumped 11¢ in seven days, on average, while the average wholesale price at brand name stations is up 3.4¢.
What does it all mean - Well, gas prices are going to go up ESPECIALLY at the smaller stations. We may actually see some
cost-cutting by major brands, but this will be done with an eye to inflicting pain on those very independent dealers that dare to compete with the major brands.
Consumers buy less gas in the rain, but the publicly available numbers show huge builds in gasoline inventories, so clearly, supply and demand are not a factor in the coming price hikes.
|0.0308||San Diego RUL||2.986||2.955||2.952|
|0.0646||San Diego DSL||3.277||3.213||3.184|
|0.0030||Los Angeles RUL||2.961||2.958||2.960|
|0.0380||Los Angeles DSL||3.242||3.204||3.192|
|(0.0030)||Orange Cnty RUL||2.959||2.962||2.966|
|0.0430||Orange Cnty RUL||3.226||3.183||3.170|
|(0.0010)||San Bern RUL||2.933||2.934||2.929|
|0.0420||San Bern DSL||3.225||3.183||3.179|