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Fuel prices out of synch with oil prices

Gas prices are at the highest level for any January on record at a current San Diego average of $3.77 a gallon.  This price is 43¢ higher than a year ago, but oddly, oil prices have not increased that much.  On a per gallon basis, oil only costs about 16¢ more per gallon than it did this time last year.

We further predict that prices will continue to climb in the next few days. Our analysis of the wholesale prices charged to unbranded independent dealers shows a 10¢ per gallon price hike, on average. Meanwhile, the prices charged to brand-name dealers have increased by an average of only 6¢.  Normally unbranded dealers can buy surplus fuel at a discount, but at this time their average wholesale price is higher than the average wholesale price paid by brand name retailers.

When this happens, it is called a "rack inversion."  Historically, rack inversions almost always precede a major upturn in prices.